The Precious Metals Week in Review – February 11th, 2022

1. Market volatility continued this week as red-hot inflation figures rocked markets in the U.S., reinforcing growing fears that the U.S. Federal Reserve will be forced into taking much more aggressive action than previously anticipated. The growing tension over Russia’s potential invasion of Ukraine also acted to send equities tumbling this week.

2. For the week ending February 5, the seasonally adjusted number of Americans filing initial claims for unemployment decreased by 16,000 from the previous week’s revised level to reach a new level of 223,000. The previous week’s level was revised higher by 1,000 claims. The 4-week moving average of claims was 253,250, a decrease of 2,000 from the previous week’s revised moving average. The previous week’s moving average was revised higher by 250 claims.

3. The Dow Jones Industrial Average plunged on Thursday, sliding over 600 points at session lows following a key inflation report that showed prices increasing faster than expected. The Consumer Price Index report, released on Thursday, showed a year-over-year increase in prices of 7.5%, the largest such gain since 1982. The 10-year Treasury yield jumped past 2% on the news and short-term rates surged even more than that as investors appeared to take the stance that the Fed would be forced to move more aggressively to keep inflation from becoming deeply entrenched in the U.S. economy.

4. Citigroup economists are now projecting that the U.S. Federal Reserve will make a 50-basis-point hike to interest rates when they meet in March. Most Wall Street economists have been expecting that the Fed will make a 25-basis-point hike when it meets next month, but January’s runaway Consumer Price Index numbers are casting doubts on that estimate. In a research note, Citi economists said “Details of January core CPI point to sustained inflation running around 6% and spreading more broadly, rather than slowing as Fed forecasts have assumed. We now expect the Fed to raise rates 50bp in March followed by four 25bp hikes in May, June, September and December.” The group also said that they expect three additional rate hikes in 2023.

5. Stocks tumbled again on Friday in afternoon trading as the tensions between Ukraine and Russia continued to escalate. The U.S. and the U.K. have now both advised their respective citizens to evacuate Ukraine as soon as possible. U.S. National Security Advisor Jake Sullivan said, at a White House briefing, that there were additional signs of Russian escalation at the Ukraine border and that it was possible that an invasion could take place during the Olympics. When asked if Russian President Vladimir Putin had made a final decision on whether to invade Ukraine, Sullivan noted that the U.S. is not certain, but that such a decision “may well happen soon.”

6. What started as a local protest against ongoing Covid restrictions and vaccine mandates with Canadian truckers blockading the city of Ottawa has now spread to major trade routes between Canada and the U.S. Three border crossings between Canada and the U.S. have been blocked by the so-called “freedom convoy.” The Ambassador bridge, which carries roughly one quarter of the trade between Canada and the U.S. through Detroit has been blocked and both U.S. and Canadian authorities are reportedly trying to direct traffic to another bridge roughly 60 miles further to the north. The Coutts crossing, which carries traffic between Montana and Alberta has also been blocked in both directions. Also as expected, the protests have begun to spread outside of Canada. New Zealand’s parliament is now facing a similar blockade, and a trucker convoy is also making its way across France. The U.S. Department of Homeland Security has also issued warnings that a trucker convoy from California to Washington D.C. is possibly being planned.

7. Crude oil surged in late trading on Friday after the U.S. National Security Advisor announced signs of further escalation along Ukraine’s borders. Jake Sullivan said “We continue to see signs of Russian escalation, including new forces arriving at the Ukrainian border. As we’ve said before, we are in the window when an invasion could begin at any time.” Brent Crude, the international benchmark for Crude oil, moved up over 3% to settle at $94.44 per barrel, while West Texas Intermediate crude, the U.S. benchmark, rose more than 3% to settle at $93.10 per barrel. At one point during the day, WTI was up over 5%, hitting $94.66 per barrel, it’s highest level since September of 2014.

8. The euro bounced slightly higher against the U.S. dollar as trading began for the week but had dropped into negative territory overnight. The euro traded in a narrow band mostly sideways through much of the week, touching what looked like its lows for the week late on Thursday then rising sharply into positive territory. The euro had returned to the negative side as Friday trading began, and as the day wore on, the euro dipped even lower than it had Thursday. The euro saw a brief rise just prior to market close but it was not enough to return it to positive territory and the euro will close out the week to the downside against the U.S. dollar.

9. The Japanese yen saw a shallow, but fairly steady decline against the U.S. dollar for most of the week, touching its lows for the week late on Thursday. The yen rebounded slightly during Friday trading, but not enough to bring it back into positive territory for the week. The yen will close out the week slightly to the downside against the U.S. dollar.

The growing potential for conflict between Russia and Western nations has taken center stage in world news for the most part. Russia’s possible invasion of Ukraine has global leaders on edge and most western nations have begun planning to send troops into the region or have already done so. The White House has told Russian President Vladimir Putin that if he is concerned about NATO’s presence near Russia’s border now, that presence will only increase further if he invades Ukraine. Despite the barrage of warnings issued by the Biden administration, that administration has yet to detail what, exactly, will happen to Russia if it does follow through with an invasion. Thus far, the standard line from the U.S. has been nothing more than that Russia will “pay a price” if it invades Ukraine. After watching the U.S.’ embarrassingly botched withdrawal from Afghanistan and its lack of response to China’s growing belligerence, it is highly doubtful that Vladimir Putin is at all concerned about whatever “price” the U.S. will make Russia pay. The U.S. has already sent some troops to the region and is apparently considering sending more into neighboring NATO member countries in Europe’s eastern region.

As expected, the so-called “freedom convoy” protest that began in Canada is beginning to impact supply chains that were already stretched to the breaking point by the spread of Covid-19. Crossings between Canada and the U.S. are being blocked by angry truckers that are fed up with vaccine mandates, ongoing Covid restrictions, and growing governmental overreach in Canada. The truckers have effectively shut down some of the main border crossings between the U.S. and Canada, which had an immediate impact on the supply of auto parts into Detroit. Auto makers are already struggling to meet production demands due to the ongoing semiconductor shortage, and further impacts to the supplies needed for their production lines will likely make the situation worse. The protests have also begun to spread outside of Canada as New Zealand and France have both discovered. Governments around the world are finding themselves under increased pressure from their various constituents to end the ongoing restrictions and mandates that have effectively crippled the global economy.

Geopolitical uncertainty has become the primary area of concern as Russia continues to stoke tensions between itself and Western nations. Equity markets have tumbled as the possibility of a Russian invasion of Ukraine has increased. Russia is a primary producer of oil and natural gas for much of Europe, and the ongoing issues have begun to send the price of both even higher than they were already, and the price surge has been global. Inflation and economic uncertainty are rising in tandem with geopolitical concerns as prices for everything from food, fuel, lumber, and other items continue to surge. As geopolitical and economic uncertainty continues to rise, savvy investors have been reexamining their portfolios to determine if they are sufficiently diversified such that they could withstand shocks in multiple investment sectors. Many such investors have chosen to increase their allocation of physical precious metals in their portfolios to try to aid in diversification. Physical precious metals have a long and storied history as a hedge against inflation, times of geopolitical uncertainty, and times of economic uncertainty. Those investors that hold to this view have steadily been acquiring physical precious metals whenever temporary price dips have allowed them to do so at a relative 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.

Friday to Friday Close (New York Closing Prices)

Previous year Comparisons

Here are your Short Term Support and Resistance Levels for the upcoming week.

This is not a solicitation to purchase or sell.
© 2022, Precious Metals International, Ltd.