The Precious Metals Week in Review – April 15th, 2022

1. It was a shortened trading week this week as markets closed for Good Friday ahead of Easter. Market volatility continued as the Russia-Ukraine war entered its eighth week with no signs of subsiding anytime soon. Russia even said that its attacks on Ukraine’s capital city of Kyiv will increase after the sinking of one of its guided-missile cruisers earlier in the week. China continues to grapple with a renewed surge in Covid cases, primarily in the city of Shanghai.

2. For the week ending April 9, the seasonally adjusted number of Americans filing initial claims for unemployment increased by 18,000 from the previous week’s revised level to reach a new level of 185,000. The previous week’s level was revised higher by 1,000 claims. The 4-week moving average of claims was 172,250, an increase of 2,000 from the previous week’s revised moving average. The previous week’s moving average was revised higher by 250 claims.

3. In the U.S., inflation continues to surge at rates not seen in decades. The headline Consumer Price Index (CPI) figure for March jumped by 8.5% from just one year ago. This is the fastest annual increase since December of 1981 and was a tenth of a percentage point over economists’ estimates for the CPI. Price surges across the food, energy, and housing/shelter sectors were the primary drivers behind the increase. Once again, real worker earnings fell for the month, coming down another 0.8% as the cost of living outpaced any wage gains that these employees may have seen during the month. Excluding food and energy to reach the so-called “core” CPI figure yielded a brighter outlook. Core CPI still increased 6.5% over the previous year, but that was in line with expectations. Core CPI climbed just 0.3% for the month in March which was actually less than the 0.5% estimate. Federal Reserve Governor Lael Brainard said that the slowing increase in core CPI was a “welcome” development in the Fed’s attempt to bring inflation under control, saying “I’ll be looking to see whether we continue to see a moderation in the months ahead.”

4. The Producer Price Index (PPI), which measures prices paid by wholesalers to acquire supplies needed to produce their goods and services, jumped 1.4% in March and is up 11.2% from just one year ago. Both figures set records in data going back to 2010. Prices for so-called “final demand” goods saw a 2.3% rise for the month, while prices for services jumped by 0.9%. Energy prices were the largest portion of the increase, rising 5.7% for the month, while food costs were up 2.4%

5. U.S. President Joe Biden’s approval rating has plunged to a new low according to a recent CNBC All-America Survey. Biden scored just 38% on his overall approval rating in the survey with 47% of survey participants saying that the economy is “poor,” which is the highest number for that particular category since 2012. Only one in five Americans that took the survey described their financial situation as “getting ahead,” which is the weakest score for that category in eight years. One in ten participants say they are “falling backward.” 56% of those surveyed said that they expect the U.S. to be in a recession within one year. Recession expectations at that high of a percentage have only ever been achieved when the survey was taken during an actual recession.

6. China, which began a two-part lockdown in Shanghai, the world’s largest container shipping port, and other regions on March 28 amid surging Covid cases and has yet to announce when it will reopen those regions and lift restrictions. The Covid outbreak in China, though it may be low compared to most other countries, is the worst for that country since the virus was first discovered in Wuhan over two years ago. Nearly all of Shanghai’s 26 million residents remain in lockdown, even though the restrictions were supposed to have ended a week ago. The Shanghai lockdown will almost certainly exacerbate supply chain problems further as containers see significant delays entering and exiting the port.

7. Russia continued its assault on Ukraine, seeming to redouble its efforts to take the capital city of Kyiv by force. The renewed assault on the capital appears to be in retaliation for Ukrainian forces sinking Russia’s flagship guided-missile cruiser, the Moskva earlier in the week. Ukrainian President Volodymyr Zelenskyy has begun to issue calls to U.S. President Joe Biden to formally label Russia as a state sponsor of terrorism. The addition of Russia to the terrorism list – which currently names Iran, North Korea, Syria, and Cuba – would allow for even harsher sanctions to be imposed than those that Russia currently finds itself struggling under.

8. Crude markets closed early this week due to the upcoming Easter holiday, but prices finally saw their first weekly gain for the month of April when the market closed on Thursday. News that the European Union may opt to phase in a ban on Russian oil imports lent support to prices ahead of the long weekend. Brent futures settled 2.68% higher on Thursday at $111.70 per barrel while U.S. West Texas Intermediate futures rose 2.59% to settle at $106.95 per barrel. Prices remain volatile as the situation in Ukraine continues to rage on. According to Reuters, many major global trading houses are planning to cut Russian crude and fuel purchases in May. The International Energy Agency also warned on Wednesday that it projected that nearly 3 million barrels per day of Russian oil could be blocked from entering the market from May forward as sanctions bite and buyers begin voluntarily foregoing Russian cargos.

9. The euro spiked lower, then shot higher against the U.S. dollar at the start of trading for the week. By Monday morning, the euro was back near opening levels again but shot back towards what would be its highs for the week by mid-day. Late Monday afternoon, the euro began a fairly steady decline that pushed it into negative territory by mid-day on Tuesday. The euro bounced briefly higher late Tuesday, but quickly resumed its downward push and was in negative territory again as Wednesday began. Late Wednesday the euro shot back into positive territory and managed to maintain the upward momentum into Thursday trading. As the market was prepping to close on Thursday, the euro plunged sharply lower, touching its lows for the week before rebounding slightly. The euro closed out the week to the downside against the U.S. dollar.

10. The Japanese yen opened trading for the week with a short-lived blip to the upside against the U.S. dollar before sliding lower overnight into Monday trading. The yen took a pause around mid-day on Monday, sliding sideways for the most part before resuming a slight downward trend late in the day on Tuesday. The yen dipped lower around mid-day on Wednesday, then reversed course and bounced slightly higher. By late Thursday then yen had resumed its downward trend and will also close out the week to the downside against the U.S. dollar.

Market volatility can be expected to remain as the Russian invasion of Ukraine continues unabated. Ukraine’s sinking of one of Russia’s flagship missile cruisers only served to anger the Kremlin and see it make a renewed effort to seize the capital city of Kyiv. Accusations of atrocities by the Russian troops in Ukraine continue to be leveled as the civilian death toll mounts. As countries weigh the outright banning of Russian oil and fuel supplies, Russia’s Energy Ministry has said that it is now limiting access to its statistics on oil and gas exports from Russia. Even as Russian supply may begin going offline, Chinese refiners are reportedly considering cutting their crude output by as much as 6% to try to offset growing fuel inventories resulting from a slew of recent lockdowns that were reinstated in an effort to combat a renewed outbreak of Covid-19 within the country.

Inflation, exacerbated by the ongoing war in Ukraine, is still expected to increase in the coming months. Already, nearly 84% of Americans have begun cutting back on their spending in order to make ends meet. According to a recent CNBC survey, 62% of respondents reported cutting back on movies, concerts, restaurants, and other “entertainment” expenses. Many also said that they are driving less due to the high cost of fuel and are being forced to tap their savings just to get by. Skyrocketing fuel prices have even forced some of the “gig-economy” workforces, such as Uber, Lyft, Grubhub, and DoorDash drivers, to scale back on the hours that they drive. The U.S. Consumer Price Index, a favorite gauge of inflation for the Federal Reserve, is now at levels not seen since the early 1980s.

As geopolitical and economic uncertainty continue to rule the news cycle, investors remain cautious about ensuring that they are not overexposing their portfolios to the perils of increasing market volatility. Many analysts have begun recommending holding an increased percentage of physical precious metals in an investment portfolio as a “safe haven” diversification play. These analysts note that the long history that precious metals have shown of retaining value during past times of economic and geopolitical turmoil makes them viable hedges against such times of inflation and geopolitical upheaval as we are witnessing now. Many investors began accumulating physical precious metals as part of their portfolio diversification plans long before the recent unrest sent prices higher, and have continued to do so whenever temporary price dips have provided them with what they deem to be another buying opportunity to acquire more product at a relative discount. Always remember, however, 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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