The Precious Metals Week in Review – October 29th, 2021

1. Inflation indicators continue to surge across the globe as the central banks of the world stubbornly stick to their views that current inflation levels are merely “transitory” in nature. As the month of October came to a close on Friday, focus turned to the upcoming decision by the U.S. Federal Reserve to begin its plan to taper off the stimulus that has been keeping the economy afloat throughout the ongoing pandemic.

2. For the week ending October 23, the seasonally adjusted number of Americans filing initial claims for unemployment decreased from the previous week’s revised level by 10,000 claims to reach a new level of 281,000. This continues to mark the lowest level for initial claims since March 14, 2020. The previous week’s level was revised higher by 1,000 claims. The 4-week moving average of claims was 299,250, a decrease of 20,750 from the previous week’s revised moving average. The previous week’s moving average was revised higher by 250 claims. This also continues to mark the lowest level for the 4-week moving average since March 14, 2020.

3. As we enter November, the U.S. Federal Reserve is expected to begin implementing its plan to taper off some of the stimulus that the central bank has been injecting into the U.S. economy to stave off the devastation that the pandemic and the ensuing lockdowns had on the U.S.’ Gross Domestic Product. The shutdowns enacted to try to limit the spread of Covid-19 resulted in a 31.2% plunge in the U.S. economy in just the second quarter of 2020 alone. For the third quarter of 2021, the U.S. economy grew at a rate of just 2%, it’s slowest growth pace since the economy cratered last year. Supply chain disruptions and labor shortages continue to plague the economy and inflation indicators are surging. Some analysts are concerned that as the Fed embarks on it’s plan to scale back stimulus that it may move in a reactive fashion, rather than a proactive one. These analysts seem to fear that the Fed may be too hasty with resuming interest rate hikes on the back of its plans to reduce stimulus measures.

4. The 2% growth figure for the U.S. economy shows just how difficult restarting the economic engine has been as governments around the world continue in their efforts to reopen and grow their various economies safely, with the pandemic still going on. Vaccines have paved the way for some reopening, but the number of breakthrough infections among those who have been fully vaccinated is still a reason for concern. The pandemic-induced shutdowns have exposed massive shortcomings in the supply chain, as well as triggering labor and goods shortages. The post-pandemic global economic recovery has been longer, and less steep than expected.

5. President Biden’s approval rating continues to slide, with the majority of Americans now disapproving of his performance. According to an NBC News poll, 7 in 10 adult Americans, including almost half of the Democrats surveyed, believe that the nation is “headed in the wrong direction.” 60% of those surveyed view Biden’s performance on restarting the economy after the pandemic negatively. There is just one year until mid-term elections will take place for seats in Congress and things are currently looking bleak for the Democrats if they wish to retain control over both the Senate and the House of Representatives. Democratic pollster Jeff Horwitt, of Hart Research Associates conducted the survey along with Republican pollster Bill McInturff of Public Opinion Strategies. Horwitt said “Democrats face a country whose opinion of President Biden has turned sharply to the negative since April. The promise of the Biden presidency – knowledge, competence and stability in tough times – have all been called into question. What people voted for was stability, and what they got was instability and chaos.” Reviewing Gallup’s historical data, Biden’s 42% approval rating is lower than any modern first-year president at a similar point in their Presidential terms.

6. House Democratic leaders are hoping to vote on President Biden’s “Build Back Better” social spending plan as well as an infrastructure bill on Tuesday. The revised social framework bill will contain nearly $1.75 trillion in spending and has been a tough sell to Republican congress members. The infrastructure bill has been a work in progress since before President Trump was voted out of office and is expected to pass without much in the way of obstruction from the Republicans.

7. Oil prices continued to surge this week, touching their highest levels since 2014. Brent crude settled close to $85 per barrel while West Texas Intermediate retained its gains and continued closing the gap between the two. WTI settled over $84 per barrel for the week and ongoing supply shortages in the U.S. due to the devastating storm that struck the Gulf Coast region this year are expected to keep lending support to WTI prices.

8. The euro began the trading week drifting sideways against the U.S. dollar in a narrow, range-bound series of peaks and valleys. The euro surged to the upside late in the day on Thursday and quickly reached its highs for the week. The euro drifted sideways at its highs through late Thursday and much of Friday but had begun drifting lower as Friday’s trading day wore on. The euro plunged to the downside just prior to closing on Friday and will finish out the week lower against the U.S. dollar.

9. The Japanese yen began the week drifting lower against the U.S. dollar. The yen touched its lows late in the day on Tuesday and quickly reversed its course. The yen climbed back into positive territory late on Wednesday before reversing again and drifting back into negative territory. The yen climbed back positive again and managed to touch its highs for the week on Thursday before reversing course yet again. The yen continued lower through Friday’s trading day and closed the week out slightly to the downside against the U.S. dollar.

Over the weekend, leaders of the G-20 joined 136 nations in endorsing an historic international tax agreement. The goal of the much-debated agreement is to make the global economy more fair and also more productive. The deal eliminates the so-called “race to the bottom” on corporate taxes, with a minimum tax of at least 15% on foreign earnings to be levied by all signatories of the deal. U.S. Treasury Secretary Janet Yellen was apparently key in negotiating for the U.S. in the historic agreement. Ms. Yellen is also in the midst of working with the Biden administration on a solution to the upcoming December 3rd deadline at which point the U.S. government will again be up against it’s debt ceiling. President Biden is attempting to work “across the aisle” with both Republican and Democrat Congress members but Republicans are holding fast to their stance that the debt ceiling should not be arbitrarily raised, and most definitely should not be eliminated altogether. In a rare break with the administration, which wants a truly bipartisan solution, Janet Yellen now says Democrats should be willing to move forward with lifting the debt ceiling without any input from Republicans. Ms. Yellen said “Should it be done on a bipartisan basis? Absolutely. Now, if they’re not going to cooperate, I don’t want to play chicken and end up not raising the debt ceiling. I think that’s the worst possible outcome.” Senate Minority Leader Mitch McConnell, who cooperated with the most recent compromise on the debt ceiling, said in a recent letter to President Biden that he “will not be a party to any future effort to mitigate the consequences of Democratic mismanagement. Your lieutenants on Capitol Hill now have the time they claimed they lacked to address the debt ceiling.”

Tuesday and Wednesday of next week, the U.S. Federal Reserve will hold its next Federal Open Market Committee meeting and will likely begin implementing its plan to reduce the amount of stimulus that it has been flooding the economy with in order to stave off the worst effects of the ongoing pandemic. As the Fed begins to taper off its $120 billion in monthly bond purchases, raising interest rates is also likely going to become more openly discussed as the Fed struggles to fight growing inflation across multiple sectors. October jobs data is also set to be released at the end of next week, but since that data will not be available until after the FOMC meeting, it will not have an immediate effect on the Fed’s monetary policy decisions this week.

As the U.S. Federal Reserve undertakes its tapering program and begins to contemplate whether the time has come to begin hiking interest rates again, investors continue to make efforts to ensure that their portfolios are diversified to help insulate them from sudden shocks in any single market or sector. Many of these savvy investors have made accumulation of physical precious metals part of their diversification plans for years, using temporary price dips as opportunities to acquire more physical products at an opportune discount. Remember, the key to profitability through the ownership of physical precious metals is to acquire the physical product and hold it for the long term. Always remember that you should never overextend your ability to maintain ownership of your precious metals over the long run.

Trading Department—Precious Metals International, Ltd.

Trading Department – Precious Metals International, Ltd.

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