The Precious Metals Week in Review – December 3rd, 2021

1. It was another volatile week in all markets, including equities and crypto currencies. Markets slid lower in what is most likely an over-reaction to the spread of the Omicron variant of Covid-19. The new variant has been discovered in several countries now.

2. For the week ending November 27, the seasonally adjusted number of Americans filing initial claims for unemployment increased from the previous week’s revised level by 28,000 claims to reach a new level of 222,000. The previous week’s level was revised lower by 5,000 claims. The 4-week moving average of claims was 238,750, a decrease of 12,250 from the previous week’s revised moving average. The previous week’s moving average was revised lower by 1,250 claims. This continues to mark the lowest level for the 4-week moving average since March 14, 2020.

3. The Nonfarm payrolls report for November was released on Friday and the results were disappointing. Wall Street expectations were for a gain of 573,000 jobs in November and the final number was just 210,000. Despite the huge miss on payroll additions, the unemployment rate was lowered to 4.2%. Even the retail sector lost jobs in November, despite the traditional holiday hiring season. Andrew Hunter, senior U.S. economist at Capital Economics said: “The disappointing 210,000 gain in non-farm payrolls in November suggests the labor market recovery was faltering even before the potential impact of the new Omicron variant, possibly as a result of the rising infection rates in the Northeast and Midwest. Nevertheless, the Fed will still push ahead with its plans to accelerate the pace of its QE taper at this month’s FOMC meeting.”

4. The Omicron variant of Covid-19 has begun spreading around the world. In Norway, a corporate Christmas party resulted in at least 60 confirmed cases of the new variant. The U.S. saw its first cases of Omicron as well. None of the confirmed cases of Omicron appear to have resulted in hospitalization thus far, so it seems that the newest variant of the disease may not be as deadly as initially feared.

5. President Joe Biden signed a short-term government funding bill into law this week, preventing yet another shutdown of the U.S. government as Congress continues to be in gridlock over drafting a new long-term spending bill. The short-term measure will keep the government operational until February and allow Congress additional time to attempt to negotiate a deal.

6. On Friday, President Biden said his administration was consulting with Congress and U.S. allies on a range of options that could convince Russia that carrying out a potential attack on Ukraine would be extremely costly. Biden told reporters on Friday “What I am doing is putting together what, I believe to be, will be the most comprehensive and meaningful set of initiatives to make it very, very difficult for Mr. Putin to go ahead and do what people believe he may do.” Later in the day, White House press secretary told reporters later in the day “We can’t predict from here what President Putin’s calculus is or what the Russians’ calculus is. We saw what they did in 2014. We’ve seen what they’re doing on the border and we’re going to consult with our allies and partners and Congress here to be prepared for a range of options.”

7. Crude oil continued to slide this week as the spread of the omicron variant continued to put pressure on the demand outlook for crude. West Texas Intermediate (WTI) settled at $66.26 per barrel, down 2.8% for the week. Over the last 6 weeks combined, WTI is down nearly 20%. Brent crude settled at $69.88, down 4% for the week. Brent is down 18% over the past 6 weeks.

8. The euro began the week sliding lower against the U.S. dollar but had begun moving sharply higher by late Sunday evening. Overnight, the euro shot into positive territory, but at mid-day on Monday, took a sharp, vertical plunge back into negative territory. The plunge was short-lived and the euro shot back into positive territory and then began a slow drift lower through the rest of the week. Just before the market close on Friday, the euro clawed its way back into positive territory and will close the week out slightly to the upside against the U.S. dollar.

9. The Japanese yen traded in a narrow range for the entire week, bouncing higher and lower in a series of relative spikes and plunges. Just prior to market close, the yen abandoned its downward drift and shot to its highest level for the week. The yen will close out the week slightly to the upside against the U.S. dollar.
It appears that the omicron variant of Covid-19, while it may potentially be more transmissible, may be far less deadly than the delta variant. Despite the mounting evidence that the symptoms of the omicron variant appear to be much milder than previous variants, markets continued to slide this week as world governments continued to argue for the potential need to shut down their economies in yet another futile attempt to slow the spread of the pandemic.

U.S. intelligence estimates that Russia has now amassed up to 175,000 troops on the border of Ukraine and that it would have the capability to begin a military offensive in the embattled country within a matter of months. An anonymous official in the Biden administration said “Recent information also indicates that Russian officials proposed adjusting Russia’s information operations against Ukraine to emphasize the narrative that Ukrainian leaders had been installed by the West, harbored a hatred for the ‘Russian World’, and were acting against the interests of the Ukrainian people.” NATO and its Western member nations continue to voice their concerns over Russia’s troop movements, calling for caution on all sides to avoid any “misunderstandings”.

Markets should be expected to remain volatile as the reaction to the latest variant of Covid continues to generate uncertainty. Global governments appear to be contemplating additional economic shutdowns in an effort to contain the further spread, even though previous measures obviously failed to do so.

November’s disappointing jobs report may be indicating that the labor market and the U.S. economy as a whole both remain under pressure. Inflation indicators continue to elicit concern within the Federal Reserve to the point where some of its members are now actively calling for the Fed to implement its first interest rate hike in years. Stock analysts are urging caution as market volatility causes wide swings in the Dow Jones. Many savvy investors have continued to take steps to ensure that their portfolios are appropriately diversified to help protect them from such volatility. Many investors have continued to take ownership of physical precious metals a vital part of their diversification efforts.

Many such investors view temporary price dips in precious metals as nothing more than buying opportunities that allow them to acquire additional physical products for their portfolios whenever price dips. 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.

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