The Precious Metals Week in Review – December 10th, 2021

1. Markets remained volatile this week as inflation data surged and reports surfaced that the U.S. Congress may be moving closer to successfully raising the debt ceiling ahead of a December 15 deadline. The omicron variant of Covid-19 continues to be of concern, despite the fact that nearly all reported confirmed cases involving that variant appear to show only mild symptoms and effects.

2. For the week ending December 4, the seasonally adjusted number of Americans filing initial claims for unemployment decreased from the previous week’s revised level by 43,000 claims to reach a new level of 184,000. The previous week’s level was revised higher by 5,000 claims. This is now the lowest level for initial claims since September 6, 1969. The 4-week moving average of claims was 218,750, a decrease of 21,250 from the previous week’s revised moving average. The previous week’s moving average was revised higher by 1,250 claims. This continues to mark the lowest level for the 4-week moving average since March 7, 2020.

3. The U.S. Senate voted on a measure that would allow the U.S. Congress to raise the so-called debt ceiling with nothing more than a simple majority vote. The measure, which is attached to a bill that would prevent automatic cuts to Medicare at the beginning of 2022 now heads to President Biden’s desk where he is almost certain to sign it into law. The Senate and the House will have to hold separate votes on raising the debt ceiling, but both chambers are controlled by the Democratic party and are likely to do so before the December 15 deadline. That is the date when the U.S. government is projected to run out of its current allotment of funding and would be forced to shut down, yet again. Republicans still adamantly refuse to vote to raise the debt ceiling, but Senate Minority Leader Mitch McConnell reached a deal with Majority Leader Chuck Schumer where the GOP agreed to allow Democrats the means to increase the limit without their support. Even so, Democrats must have the support from every one of their members in the Senate, including a tie-breaking vote by Vice President Kamala Harris, in order to raise the limit. Raising the limit will not authorize new spending, the Congress must still tackle a new spending appropriation bill some time before mid-term elections take place in 2022.

4. The U.S. Labor Department released a report on Friday that showed inflation had accelerated at its fastest pace since 1982 in November. The Consumer Price Index, which is a measure of the cost of consumer goods and services, rose 0.8 % for the month in November, marking a 6.8% increase on a year-over-year basis. This is the fastest rate of increase in inflation since June of 1982. Excluding food and energy prices, which frequently tend to be extremely volatile, core CPI was still up 0.5% for the month, marking a 4.9% increase year-over-year for core CPI. That is the fastest pace of increase in core CPI since mid-1991. Inflation could accelerate further, especially given the fact that employers have continued to increase wages in an attempt to draw in workers, who still appear reluctant to return to work as the pandemic continues to rage on, particularly in the services industry such as restaurants and bars. Energy prices continue to be the one of the leaders in the surge, rising over 33% since November of 2020. Gasoline has also seen a massive increase, up over 58% for the year.

5. According to a recent survey by media outlet CNBC, the public opinion of President Biden’s handling of the pandemic and the economy has plunged as we move towards closing the book on the final month of 2020. President Biden’s overall approval rating, according to the CNBC All-America Survey, stands at just 41%. His approval rating over his handling of the pandemic has dropped to 46% approving, with 48% disapproving and an apparent 6% either undecided, or unwilling to answer the question. On his handling of the economy, only 37% approve compared to a disapproval rate of 56%. In another measure, Americans’ preference for who should have control of Congress appears to be leaning towards Republicans. The poll surveyed only 800 Americans nationwide and is expected to have a margin of error of as much as 3.5%. Among those who voted for Biden in the hotly contested election last year, his approval has dropped from 80% to 69%, according to the April survey.

6. On Wednesday, Russia sent a letter to the U.S. Embassy in Moscow warning about “dangerous consequences” that the U.S. would face if it continued military flights and naval maneuvers near Russia’s borders. Russian Foreign Ministry spokeswoman Maria Zakharova called the U.S.’ actions “provocations near Russia’s borders.” Zakharova added “Reserving the right to respond to the corresponding challenges posed by the United States and NATO members, we call for substantive dialogue on security guarantees and a discussion of pathways to reduce military and political tensions and to prevent dangerous incidents in the air and at sea. Otherwise, all the means at our disposal will be used to prevent and neutralize emerging threats.” The threat came just one day after President Biden held a video call with Russian President Vladimir Putin where he apparently threatened to implement “strong economic and other measures” if Russia takes any military action against Ukraine. Biden told reporters, following the call, “I made it very clear: If, in fact, he invades Ukraine, there will be severe consequences – severe consequences – and economic consequences like none he’s ever seen or have been seen, in terms of being imposed.” Biden downplayed the use of force, saying “The idea the United States is going to unilaterally use force to confront Russia from invading Ukraine is not on – in the cards right now.”

7. The Centers for Disease Control announced this week that 25 states have confirmed at least one case of the new omicron variant of Covid-19, with some of those cases indicating that community spread of the new variant is already underway. To date, no deaths linked to the new variant have been reported and only one of the patients has been hospitalized so far. Reported symptoms appear to be cough, fatigue and congestion, or a runny nose, all mild when compared to the effects of infection with previous variants. 79% of the patients were fully vaccinated prior to testing positive, 14 of those infected had also received booster doses of the vaccine. Only 6 of the 22 cases appeared in people who had previously suffered through an earlier infection of Covid-19.

8. China threatened both the U.S. and Australia over their decision to conduct a diplomatic boycott of the 2022 Winter Olympic games in Beijing. The U.S. announced its intent to boycott the games on Wednesday over what it sees as human rights abuses by China against the Muslim Uyghur minority in Xinjiang. Australia, Britain and Canada all made similar announcements later in the week. A foreign ministry spokesman for China, Wang Wenbin, told reporters “The US, Australia, Britain and Canada’s use of the Olympic platform for political manipulation is unpopular and self-isolating, and they will inevitably pay the price for their wrongdoing. Whether their officials come or not, they will see the successful Beijing Games.”

9. Crude oil was on track for the biggest weekly gain in the sector since late August. Both Brent Crude and West Texas Intermediate were on track for more than 7% price gains this week, their first such gain in seven weeks. Brent crude futures settled at $75.15 per barrel, while WTI futures settled at $71.67 per barrel.

10. The euro began the trading week sliding lower against the U.S. dollar, touching its lows for the week near mid-day on Tuesday. Immediately after touching the low, the euro spent Wednesday surging higher, gaining positive territory by the end of the day. The euro touched its highs for the week in the early morning hours of Thursday and began moving lower again. The euro crossed back into negative territory at mid-afternoon on Thursday, attempted a slight recovery that went through the overnight trading session. As Friday trading wore on, the euro dipped lower again, but before market close, had surged back into positive territory once more. A brief dip just prior to closing was not enough to bring the euro back into negative territory and it closed out the week slightly to the upside against the U.S. dollar.

11. The Japanese yen opened trading drifting lower against the U.S. dollar this week. The yen slid lower through mid-day Tuesday, attempted a shallow recovery that lasted through Wednesday, when the yen slid to its lows for the week. The yen moved slightly higher after touching the lows but could not gain enough momentum to move back into positive territory. On Friday, the yen slid lower again, but moved near vertically higher just prior to the market close. Despite the upward move, the yen will still close out the week slightly to the downside against the U.S. dollar.

Further data on omicron, as the number of infections continues to spread, seems to show that the newest variant of the dreaded coronavirus that began the pandemic may produce only mild symptoms, especially among those who have already had the disease, or have been “fully” vaccinated. None of the cases discovered in the U.S. have resulted in any deaths, and only one of the cases has thus far required hospitalization. If the data continues to show that the new variant may be more transmissible, but far less deadly than any of the previous variants, then it might be likely that world governments may consider the latest round of lockdowns and restrictions an overreaction to the perceived threat. Even so, it is unlikely that any further lockdowns will be rescinded quickly, with most governments choosing to err on the side of caution rather than optimistic early reports that the danger may not be as bad as feared.

Russia continues to be at odds with Western nations over its intentions for Ukraine. Moscow has left the troops it amassed on the border with Ukraine in place and this week chastised the U.S. and other NATO members for the military exercises that they have decided to undertake in the region. Russia intercepted a 50 year old Ukrainian naval ship in the region on Thursday, saying it had failed to obey orders, and calling that failure a “prelude to war.” The vessel was eventually allowed to return to port, but the encounter shows just how high tensions have become in the region. Moscow issued a list of “proposed agreements” that it portrays as a new framework for security in Europe, including that NATO withdraw its pledge to allow Ukraine and Georgia to participate in future security talks as full members of NATO.

Inflation data continues to show the fastest increase in consumer prices in decades as food, energy and commodities all surge. In some cases, such as that of gasoline, prices have surged well over 50% from just one year ago. The latest data from the U.S. Department of Labor show that inflation is up by 6.8% overall from one year ago. Even excluding volatile food and energy from the calculation, inflation is still up 4.9% on the year. The U.S. Federal Reserve has already begun to taper off the stimulus it has been providing to keep the economy afloat as the pandemic wore on, but interest rate hikes may come sooner than expected if inflation shows signs of becoming runaway.

As geopolitical tensions continue to rise, along with consumer prices, investors have continued to ask themselves if their portfolios are diversified enough to withstand potential geopolitical or further economic shocks. While many investors have continued piling their capital solely into equities, savvy investors have spread their investments out across multiple sectors. Many have chosen to utilize alternatives to equities, such as real estate, crypto-currencies, and precious metals. Of all of these alternatives to equities, precious metals appear to be the most undervalued, for the moment. Real estate prices remain through the roof as workers who formerly had to report to office buildings to perform their job duties have suddenly discovered that they can work from home, if they only purchased a home with one more bedroom that could be converted to an office. Cryptocurrencies have ridden a rollercoaster over the last few years, and reports this week surfaced that many new investors who had purchased bitcoin at the top only months ago were now selling those investments at a loss to try to minimize the damage as China and other governments around the world show signs of cracking down on the unregulated currencies.

Precious metals, meanwhile, have seemingly failed to see the same percentage gains as these other assets. The key to profiting from an investment is to purchase it when the price is low, maintain your ability to own it during times of volatility, and then sell it once prices have increased to satisfactory levels once more. Many analysts feel that precious metals, particularly silver, are currently undervalued, particularly given their increasing role in medicine and technology. Some investors continue to take the same view as these analysts and have used temporary price dips as buying opportunities to acquire more physical precious metals for the purpose of diversifying their portfolios even further. 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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