The Precious Metals Week in Review – April 22nd, 2022

1. Volatility remains elevated as the conflict between Russia and Ukraine rages on. Stocks were particularly volatile, accelerating their selloff into Friday, with the S&P 500 on track for its third losing week in a row. Friday’s selloff in the Dow Jones Industrial Average was the worst day in April, so far. On Friday, the DJIA eventually closed over 900 points to the downside.

2. For the week ending April 16, the seasonally adjusted number of Americans filing initial claims for unemployment decreased by 2,000 from the previous week’s revised level to reach a new level of 184,000. The previous week’s level was revised higher by 1,000 claims. The 4-week moving average of claims was 177,250, an increase of 4,500 from the previous week’s revised moving average. The previous week’s moving average was revised higher by 500 claims.

3. Federal Reserve Chairman Jerome Powell said Thursday that “it is appropriate in my view to be moving a little more quickly” to raise interest rates. Powell was speaking at an International Monetary Fund panel that was being moderated by CNBC anchor Sara Eisen. Powell continued, saying “I also think there is something to be said for front-end loading any accommodation one thinks is appropriate. I would say 50 basis points will be on the table for the May meeting.” His statement came as no real surprise, markets have been factoring in a 50 basis point hike since the Fed concluded its last Federal Open Market Committee meeting and opted, for the first time in years, to raise interest rates by 25 basis points.

4. A day before Fed chair Powell made his remarks, San Francisco Fed President Mary Daly remarked that the coming series of rate hikes by the Fed could work to tip the U.S. economy over into a “shallow” recession. Daly said, “Accounting for the risks of being too fast or too slow, I see an expeditious march to neutral by the end of the year as a prudent path.” Citing research by former Fed vice chair Alan Blinder, who noted that during 11 previous Fed interest rate hiking cycles, seven were followed by a “mild” recession, or no recession at all, Daly said she projects that the current rate hiking cycle could see the U.S. economy move to “something that looks like below-trend growth, but not tip into negative territory, but could potentially tick into negative territory.”

5. The U.S. Treasury Department announced a new expansion to Russian sanctions on Wednesday to include businesses and individuals that are seen to be helping Russia evade ongoing sanctions for its continued actions in Ukraine. Treasury officials said that the new sanctions target the Russian commercial bank Transkapitalbank, and a network of more than 40 people that it believes have been helping Moscow avoid crippling sanctions. Brian Nelson, the department’s undersecretary for terrorism and financial intelligence said “Treasury can and will target those who evade, attempt to evade, or aid the evasion of U.S. sanctions against Russia, as they are helping support Putin’s brutal war of choice.” The United States will work to ensure that the sanctions we have imposed, in close coordination with our international partners, degrade the Kremlin’s ability to project power and fund its invasion.”

6. On Wednesday, Russian military officials announced a successful test of its Sarmat Intercontinental Ballistic Missile (ICBM). The military said that the launch was “fully successful”, proving the missile’s capabilities “in all phases of its flight.” Pentagon press secretary John Kirby, discussing the launch said, “Russia properly notified the United States under its New START obligations that it planned to test this ICBM. Such testing is routine. It was not a surprise. We did not deem the test to be a threat to the United States or its allies”. Russian President Vladimir Putin said of the launch “This really unique weapon will strengthen the combat potential of our armed forces, reliably ensure Russia’s security from external threats and make those, who in the heat of frantic aggressive rhetoric try to threaten our country, think twice.”

7. For the first time since it began its invasion of Ukraine at the end of February, Russia has indicated what its intentions are toward the country. A Russian general said Friday, “Since the beginning of the second stage of the special operation, and it started just two days ago, one of the tasks of the Russian army is to establish full control over the Donbas and southern Ukraine. This will provide a land corridor to the Crimea as well as influence the vital objects of the Ukrainian economy.” General Rustam Minnekayev continued, saying “Establishing control over southern Ukraine would also give the Russian army access to Transdniestria, where facts of oppression of the Russian-speaking population have also been observed.” Transdniestria is a breakaway region of Moldova. It is not internationally recognized, but its leaders are heavily pro-Russia and there are roughly 1,500 Russian troops stationed in the region. Minnekayev’s comments seem to indicate that Russia may also have intentions to move on Moldova. Ukraine’s defense ministry said after the statement was revealed, “They stopped hiding it” and said that Russia had finally “acknowledged that the goal of the ‘second phase’ of the war is not victory over the mythical Nazis, but simply the occupation of eastern and southern Ukraine. Imperialism as it is.”

8. As interest rates continue rising, mortgage demand in the U.S. is plunging. Mortgage applications to purchase a home fell 3% for the week and are over 14% lower than this same week one year ago. Refinance demand continues to fall as well, down 8% for the week and 68% lower than this same week one year ago. Mortgage rates are now at their highest levels since 2010 as the average interest rate for a 30-year fixed-rate mortgage moved to 5.2% last week.

9. Crude oil stepped back from its gains last week, declining nearly 5% on concerns that global growth could be weaker than anticipated. China’s continued lockdowns due to a renewed spread of Covid-19 are also impacting crude markets as analysts have begun to lower their demand forecasts due to declining consumption levels there. Brent crude settled at $106.65 per barrel while U.S. West Texas Intermediate crude settled at $102.07 per barrel.

10. The euro dipped against the U.S. dollar at the start of trading for the week, but quickly swung back into positive territory before reversing course and drifting lower again. The euro touched its lows for the week Tuesday morning, then began struggling higher, making its way back into positive territory by Wednesday morning. The euro saw a relatively sharp spike to the upside on Thursday, touching its highs for the week before dropping back near opening levels by late Thursday afternoon. The euro dipped back into negative territory on Friday, attempted a recovery, then dipped lower again, nearly testing new lows for the week. The euro saw a brief rise just prior to the market close, but still appears set to close out the week to the downside against the U.S. dollar.

11. The Japanese yen drifted sideways against the U.S. dollar when trading reopened for the week but had begun dropping steadily by mid-day on Monday. The yen touched its lows for the week early Wednesday morning, then reversed course. By late Wednesday the yen had reversed roughly half of its losses, but it could not maintain the upward momentum and began trending lower through the rest of the week. The yen will close out the week to the downside against the U.S. dollar.

Russia’s invasion of Ukraine took a decided turn this week as a Russian general finally revealed that the end goal of Russia’s so-called “special operation” in Ukraine was to seize control of the Donbas region and the southern part of Ukraine. General Rustam Minnekayev also hinted that seizing control of those areas would allow Russia’s military easier access to a pro-Russian breakaway region of Moldova. Russia’s excuse for invading Ukraine was that Russian-speaking individuals in the eastern regions of Ukraine were suffering under acts of oppression. General Minnekayev uttered similar statements regarding Transdniestria, the aforementioned breakaway region in Moldova which has never been recognized internationally as being separate from Moldova. The fact that Russia’s military is already setting the stage for conducting a similar incursion into Moldova under the same pretense that it used to invade Ukraine was not lost on the world’s leaders. The U.S. continued to pile additional sanctions on Russia this week with the Department of Treasury sanctioning a Russian commercial bank that it accused of helping Russia to evade existing sanctions that were already in place.

The Biden administration is desperately trying to put a positive spin on the state of the U.S. economy ahead of the upcoming mid-term elections. Poll numbers have placed Biden’s approval ratings near record lows and many Democrat Senators and Representatives are polling exceptionally low as well. Despite surging inflation that is steadily outpacing the cost of living, the Biden administration says that they project strong growth in GDP in 2022. On Wednesday, Biden wrote, “I’m doing everything I can to bring down prices and address the Putin Price Hike.” A senior administration official, speaking to CNBC anonymously, said “We are facing real risks and some challenges. One risk is the war that Putin has started in Ukraine. That has real effects on the U.S. economy, largely through energy prices and food.” The official continued, saying “When you put it all together, the U.S. economy is in a strong position, even as we face some additional risks in the months ahead.” If inflation continues to surge in defiance of an increasingly hawkish Federal Reserve, the Democratic party may face a wave of voter angst that could see many of them shown the door of the House and the Senate as voters look to try to change the balance of power in the fully Democrat-controlled government which has been at the helm of an increasingly struggling economy since Biden was elected.

Geopolitics and surging inflation should be expected to continue casting a pall of uncertainty on the world’s various economies. As the Federal Reserve publicly ponders the necessity for conducting a 50 basis point interest rate hike at its May FOMC meeting, some analysts are beginning to speculate that inflation is growing so fast that the Fed may even be forced into a 75 basis point hike in the very near future. All markets saw declines this week as investors and analysts alike absorbed this news. Many investors, with an eye toward ensuring that their portfolios are sufficiently diversified against declines across multiple sectors, took advantage of a dip in precious metals prices to add more physical products to their portfolios at a relative discount. Given precious metals’ history of performing well in environments of geopolitical and economic uncertainty and their past performance during times of recession and rising interest rates, many investors continue to choose to hold physical precious metals in their portfolios as part of their diversification strategies. 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.

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.