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

1. Market volatility continued this week, particularly in equities and commodities. As the Russia-Ukraine war raged into its third week, the Dow Jones Industrial Average headed for its fifth straight week of losses. Commodity markets also saw their own share of volatility amid the impact of continued efforts to increase sanctions against Russia for its invasion of Ukraine.

2. For the week ending March 5, the seasonally adjusted number of Americans filing initial claims for unemployment increased by 11,000 from the previous week’s revised level to reach a new level of 227,000. The previous week’s level was revised higher by 1,000 claims. The 4-week moving average of claims was 231,250, an increase of 500 from the previous week’s revised moving average. The previous week’s moving average was revised higher by 250 claims.

3. On Thursday, U.S. Treasury Secretary Janet Yellen said that Americans will likely see yet another year of “very uncomfortably high” inflation. Speaking with CNBC’s “Closing Bell”, Secretary Yellen said “I think there’s a lot of uncertainty that is related to what’s going on with Russia in Ukraine. And I do think that it’s exacerbating inflation. I don’t want to make a prediction exactly as to what’s going to happen in the second half of the year. We’re likely to see another year in which 12-month inflation numbers remain very uncomfortably high.” Ms. Yellen’s comments came on the heels of the Labor Department publishing its latest gauge on how fast prices are surging for American consumers. The report showed that the Consumer Price Index (CPI) for February rose 7.9% from one year ago. This is the highest level for the CPI since January of 1982.

4. Gas prices, according to AAA, are now up roughly 24% in just the last month, and 53% higher than just one year ago. The ongoing war between Russia and Ukraine has acted to send oil and fuel costs skyrocketing and the increases are leading a record number of small businesses that are now raising prices because of the surging costs of raw goods themselves, and in the fuel costs to transport those goods.

5. U.S. Army Secretary Christine Wormuth said on Tuesday that Russia’s invasion of Ukraine will likely continue to escalate. Ms. Wormuth said “Unfortunately, I think that this is going to get worse before it gets better, as it looks like the Russians are going to turn to some potentially brutal tactics. If you look at what the Russians did for example in Syria, in terms of being willing to bomb civilians, bomb hospitals.” Ms. Wormuth continued, saying “Or the way they approached the siege of Grozny [in 1999 and 2000], when they were fighting in Chechnya. I am concerned that that’s the kind of tactics that we could see the Russian military turn to.” CIA director William Burns agreed, saying “Instead of seizing Kyiv within the first two days of the campaign, which was what his [Putin’s] plan was premised upon, after nearly two weeks, they still have not been able to fully encircle the city. I think Putin is angry and frustrated right now. He’s likely to double down and try to grind down the Ukrainian military with no regard for civilian casualties.”

6. The U.S. Senate passed a government funding bill this week that will see the government funded through September, avoiding a looming government shutdown. The legislation includes $13.6 billion in both humanitarian and military aid for Ukraine as it continues to battle Russia’s invasion of its sovereign territory. The aid to Ukraine resulted in lawmakers deferring $15.6 billion in further Covid relief for its own citizens to later legislation attempts. The House of Representatives passed the legislation on Wednesday, and now that the bill has passed the Senate, it will head for the desk of President Joe Biden for signature into law. Congress had only until Friday to pass a spending plan to head off another government shutdown.

7. On top of the ongoing Russia-Ukrainian war, a senior U.S. administration official said on Thursday that North Korea is developing a new long-range missile system which it tested during February and again in March. The official, speaking to reporters on condition of anonymity, said “This is a serious escalation by the DPRK. These launches are a brazen violation of multiple United Nations Security Council resolutions, vehemently raise tensions, and risk destabilizing the security situation.”

8. Russia has now surpassed Iran as the most sanctioned country on the planet. President Joe Biden issued an executive order this week blocking U.S. imports of Russian products, including alcohol, seafood, and non-industrial diamonds. The order will also halt U.S. exports of what the Biden administration called “luxury items” such as high-end watches, clothes, jewelry, premium liquors, and luxury vehicles. In a speech at the White House on Friday morning, Biden said “they’re not the last steps we’re taking. Putin is the aggressor and Putin must pay the price.”

9. Later on Friday, President Biden called for the U.S. to revoke Russia’s “most favored nation” status, effectively downgrading Russia as a trading partner and potentially opening the door for even more sanctions. Canada has already removed Russia’s “most favored nation” status as of last week and if the U.S. follows suit, it will pave the way for taxes to be imposed on any goods that Russia exports to the U.S. Speaking on the war in Ukraine and the actions taken to penalize Russia for its aggression, Biden said “Putin’s war against Ukraine will never be a victory. He hoped to dominate Ukraine without a fight, he failed. He hoped to fracture European resolve, he failed. He hoped to weaken the transatlantic alliance, he failed. He hoped to split apart American democracy, in terms of our positions, he failed.”

10. India announced on Friday that it had accidentally fired a missile into Pakistan this week due to a “technical malfunction” that took place during routine maintenance. In a statement, the Indian Ministry of Defence said “On 9 March 2022, in the course of a routine maintenance, a technical malfunction led to the accidental firing of a missile. It is learnt that the missile landed in an area of Pakistan. While the incident is deeply regrettable, it is also a matter of relief that there has been no loss of life due to the accident.” Pakistan seems to have taken the incident in stride however, doing nothing more than summoning India’s envoy to protest the event. Pakistan warned India “to be mindful of the unpleasant consequences of such negligence and take effective measures to avoid the recurrence of such violations in the future.”

11. Oil prices seemed to take somewhat of a pause this week as traders looked to assess whether further supply disruptions may be in the making due to events in Ukraine and the ongoing uncertainty over Iranian oil stocks returning to the global market. Brent crude settled at $111.79 per barrel while West Texas Intermediate (WTI) settled at $109.11 per barrel. Ongoing talks to attempt to revive the 2015 Iran nuclear deal looked near collapse as Russia, who is still involved in the discussions, made a last-minute demand for sanctions relief as part of it agreeing to the deal.

12. The euro dipped lower against the U.S. dollar at the start of the trading week but had touched its lows for the week by mid-day Monday and began a struggling climb back towards positive territory. On Wednesday, the euro surged higher, but quickly plateaued around mid-day and began a sliding trend to the downside that briefly reversed late on Thursday. On Friday, the euro dipped back below its opening levels for the week and appears set to close out the week slightly lower against the U.S. dollar.

13. The Japanese yen drifted shallowly lower against the U.S. dollar to start the trading week and then gently accelerated its decline throughout the rest of the week. The yen’s decline accelerated further on Friday, touching its lows for the week just prior to market close. The yen closed out the week to the downside against the U.S. dollar.

As Russia’s invasion of Ukraine entered its third week, Russian forces appeared to be seeking to expand their offensive, striking into new areas in the western portion of Ukraine. Russian President Vladimir Putin has reportedly also approved the recruitment of “volunteers” from Syria and other Middle Eastern locations to come join the fighting. So far, the war has forced over 2.5 million people to flee Ukraine, while others have opted to stay and fight, seeking refuge underground amid continued Russian air strikes. Russia continues to defy efforts to establish a cease-fire that would allow the evacuation of additional Ukrainians that are currently trapped in the port city of Mariupol to the south. Mariupol has been without running water and electricity for 10 days and is also experiencing a shortage of food supplies as temperatures hover near freezing. Friday’s westward push by Russian forces saw airstrikes hit near airports in two cities in the region, Ivano-Fankiivsk and Lutsk.

Inside Russia, Moscow has continued to try to control the flow of information to its own citizens, making more moves to restrict access to foreign social media platforms such as Facebook, Twitter and Instagram. Western nations have been mostly united in leveling sanctions against Russia, crippling its economy and sending the ruble plunging, the impact of this on Russian citizens cannot be understated, yet information on the feeling of the general populace in Russia regarding Putin’s invasion of Ukraine has apparently been difficult to obtain. Foreign businesses are shuttering locations in Russia, if not exiting the country altogether as sanctions cut off the ability to receive payments and take credit cards inside Russia, so as citizens begin to feel the full weight of the sanctions being leveled against their country, feelings towards their leader may begin to change.

Geopolitical and economic uncertainty should be expected to continue for the foreseeable future as Russia continues its attempted conquest of Ukraine. Even if hostilities were to cease today in Ukraine, a key exporter of wheat and other agricultural goods to much of the world, the infrastructure damage which has resulted from repeated shelling and air strikes during the invasion likely means that it will be months, if not years, before Ukraine will be able to resume full operation of its industries. Supply chains, already strained from the effects of the Covid-19 pandemic, have become even more constrained by the effects of both the war itself, and the sanctions specifically leveled against Russia because of its acts. Global costs for energy, food, fuel, oil, and other commodities are skyrocketing and analysts and officials alike are warning of more pain to come. The U.S. announced this week that it will be banning all imports of Russian oil and gas, and the U.K. has claimed that it believes it can end its imports by the end of the year. The European Union has become more and more reliant on Russian energy exports over the years but still believes it can cut its gas imports by roughly two-thirds. Stock markets headed for their fifth straight losing week amid so much uncertainty. Investors have continued to try to make certain that their portfolios remain sufficiently diversified to withstand the ongoing corrections, seeking alternatives to equities that have historically benefited from such times of uncertainty. Many such investors long ago began accumulating physical precious metals in their portfolios as part of their diversification plans. During times of high inflation and both geopolitical and economic uncertainty, physical precious metals have a long history of retaining their value. Remember that 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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