The Precious Metals Week in Review – December 24th, 2021

1. Due to the timing of the holiday season this year, there will be back-to-back shortened trading weeks. As the end of the year approaches, trading in most markets can be expected to become light and news will likely turn towards the usual year-end summaries.

2. For the week ending December 18, the seasonally adjusted number of Americans filing initial claims for unemployment was unchanged from the previous week’s revised level of 205,000. The previous week’s level was revised lower by 1,000 claims. The 4-week moving average of claims was 206,250, an increase of 2,750 from the previous week’s revised moving average. The previous week’s moving average was revised lower by 250 claims.

3. President Biden signed a bill on Thursday that bans imports from China’s Xinjiang region and imposes sanctions on individuals that the U.S. claims are responsible for forced labor in the region. Biden’s administration has previously described the abuse of Uyghur and other Muslim minorities in Xinjiang as “widespread, state-sponsored force labor” and “mass detention.” Beijing continues to deny that any human rights abuses are occurring in the region. The measure follows last week’s decision by the Commerce Department to impose trade restrictions on 34 Chinese entities and research institutes over their connections to human rights abuses.

4. The omicron variant of Covid-19 continues to spread throughout the world, but recent studies out of South Africa, where the variant was first identified, appear to show that the most recent variant, while it may be more highly transmissible and spread faster than previous variants, may also be less likely to cause serious complications. The South African study indicated that those individuals infected with the omicron variant were up to 80% less likely to be admitted to the hospital than those infected with previous strains. Studies from Scotland and England of the omicron variant also appear to back up the findings in South Africa.

5. Over 2,000 flights were cancelled worldwide on Christmas Eve, with 500 of those being in the U.S. alone. Airlines blamed the majority of the cancellations on the ongoing spread of Covid-19. United Airlines said in a statement on Thursday, “The nationwide spike in Omicron cases this week has had a direct impact on our flight crews and the people who run our operation. As a result, we’ve unfortunately had to cancel some flights and are notifying impacted customers in advance of them coming to the airport.”

6. On Tuesday, President Biden addressed the nation from the White House amid the surge in Omicron infections to try to alleviate concerns that the country may be heading for renewed restrictions and lockdowns, which would create even further economic turmoil. Biden bluntly said “Are we going back to March 2020? The answer is absolutely no. No.” Despite Biden’s assurances, many businesses have already returned to limited hours or restricting their numbers of customers in response to Omicron.

7. In thin trading for the holiday-shortened week, Crude oil still managed to eke out some gains. Brent crude futures settled at $76.85 per barrel on Thursday, while West Texas Intermediate futures settled at $73.79 per barrel. Many analysts believe that if the data on the Omicron variant continues to be positive, meaning that while the new strain appears more contagious, it also appears to be far less deadly, that oil prices could continue to see steady support.

8. The euro began the week immediately sloping higher against the U.S. dollar. The euro paused it’s upward climb briefly at mid-day on Monday, and then bounced along in a narrow trading range basically sideways until Wednesday morning. On Wednesday, the euro shot higher and continued climbing into Thursday, when there was a slight reversal. The euro recovered quickly and moved sideways near its highs for the week into Friday. Another slight reversal on Friday took the euro slightly lower but it will still close the week out to the upside against the U.S. dollar.

9. The Japanese yen traded mostly sideways against the U.S. dollar at the start of the shortened trading week. The yen drifted sideways in a narrow range through mid-day on Tuesday, then began a fairly steady downward trend that lasted the rest of the week. The yen will close out the week slightly to the downside against the U.S. dollar.

As we begin the process of closing out yet another historic year amid an ongoing pandemic, trading volumes can be expected to be thin as market traders take time off for the holidays. The continued surge in inflation, exacerbated by the further spread of new variants of Covid-19 is not likely to abate any time in the near future. As Omicron becomes the dominant variant of Covid-19, many countries have begun to re-implement lockdowns and restrictions in what is likely yet another futile attempt to halt the spread of the disease. New studies appear to show that the latest variant, while being more highly transmissible, is far less virulent and nearly 80% less likely to result in treatment requiring hospitalization than any previous variant of Covid-19.

Supply chain issues continue to cause shortages in nearly all sectors. Transportation, Electronics, Apparel, all have been affected by shortages of the components to make their goods. The ongoing semiconductor shortage has triggered shortages for auto manufacturers and electronics manufacturers alike. The shortages in components are causing shortages in end goods, despite the assurances from most governments that the “shelves are stocked” this Christmas.

Inflation continues to be the primary area of concern, but year-end new summaries are now likely to inundate mainstream media airwaves in lieu of more useful news. Thin trading is likely throughout the end of the year, but volatility may still rear its ugly head if any news of note does happen to occur prior to year-end. As stocks have continued their seemingly inexorable rise in what is already record territory, many investors have continued to take steps to ensure that their portfolios are not already overexposed to equities. A well diversified portfolio is key to surviving market corrections and geopolitical and economic turmoil. Many investors have continued to add physical precious metals to their portfolios as temporary price dips have afforded them the opportunity to do so at a discount. Precious metals have a long history of offering a hedge against inflation, or even geopolitical or economic turmoil. 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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