The Precious Metals Week in Review – May 27th, 2022

1. Market volatility continued This week however the Dow Jones Industrial Average managed a fifth consecutive day of gains while the S&P rallied from last week’s bear market levels. The S&P and the NASDAQ were both on track to snap 7-week losing streaks. The Russia-Ukraine war continues to rage on, with Russia making gains in its quest to seize the Donbas region this week.

2. For the week ending May 21, the seasonally adjusted number of Americans filing initial claims for unemployment decreased by 8,000 from the previous week’s unrevised level to reach a new level of 210,000. The 4-week moving average of claims was 206,750, an increase of 7,250 from the previous week’s unrevised moving average.

3. The Federal Reserve released the meeting minutes from the last Federal Open Market Committee meeting it held in May to set the course of monetary policy this week. The minutes indicated that the central bank was willing to continue with its plan to carry out multiple 50-basis-point interest rate hikes and might even be willing to go further than markets currently expect. The minutes also suggested that the Fed may opt to move beyond its “neutral” stance on monetary policy in favor of a more “restrictive” stance.

4. First quarter gross domestic product (GDP) in the U.S. declined at a 1.5% annual rate, worse than the estimate of 1.3% that the Dow Jones had projected and a downward move from the initially reported 1.4%. The latest data from the Commerce Department is the worst quarter for GDP since the early days of 2020 when the growing shutdowns due to the pandemic literally caused GDP to take a vertical shift downward. GDP contracted despite strong consumer spending as weaker business spending and downward revisions to private investment offset any potential gains.

5. The World Economic Forum kicked off this week in Davos, Switzerland. The forum is an annual gathering of the world’s financial elite and many of the attendees this year painted a bleak picture of the state of the world’s economies. International Monetary Fund Managing Director Kristalina Georgieva noted in a panel during Monday that food prices are top of the list of concerns. Georgieva said “We have a commodity price shock in many countries, and the particular shock I want to bring your attention to is food price shock. Over the last week, because of that sense that maybe the economy is getting into tougher waters, the oil price went down but food price continues to go up, up, up, up. Why? We can shrink the use of petrol when growth slows down, but we have to eat every day, and the anxiety about access to food at a reasonable price globally is hitting the roof.” Earlier in the week, in a blog post, Georgina warned that the global economy is looking at “a confluence of calamities” that could see it face its “biggest test since the Second World War.” The IMF now estimates that growth, on a global scale, will likely slow to 3.6% in 2022, down from 6.1% just one year ago.

6. Billionaire financier George Soros was also at Davos this weekend and called out China in one of his speeches. Soros criticized Chinese President Xi Jinping’s “zero-Covid” policy, which continues to see lockdowns in effect on a massive scale across mainland China, saying that this policy has sent China’s economy into a “freefall” since the lockdowns began in March. Soros said that China’s “steeply declining economic activity” could trigger a global slowdown, saying “Coming on top of the real estate crisis, the damage will be so great that it will affect the global economy. With the disruption of supply chains, global inflation is liable to turn into global depression.”

7. Turkey’s President Recep Tayyip Erdogan continues to state that he will not approve the NATO applications for either Finland or Sweden, effectively blocking both from becoming member nations. Turkey is reportedly seeking concessions for its vote, seeking extradition of suspected Kurdish militants from each country and for NATO to remove existing limits on Turkey’s ability to purchase weapons.

8. Oil prices edged higher this week as supply fears continued ahead of the U.S. Memorial Day holiday weekend, the traditional start of the U.S.’ peak “summer driving” season. The EU continues to negotiate whether to place an outright ban on Russian crude oil. Hungary has been resistant to further sanctions and an outright ban on Russian-supplied oil, but analysts expect EU officials may reach an agreement by Sunday, just in time to endorse new sanctions or some form of ban at their May 30-31 summit. Brent Crude settled at $119.43 per barrel while U.S. West Texas Intermediate settled at $115.07 per barrel.

9. The euro began moving higher against the U.S. dollar as soon as the trading week began. The euro made most of its gains early in the week, moving near vertically higher on Monday, making further gains on Tuesday and nearing its highs for the week. The euro retreated slightly overnight on Wednesday, but by late Wednesday afternoon had resumed its upward climb. The euro touched its highs for the week in early morning trading on Friday and then retraced slightly as the day wore on. Despite the slight retracement, the euro will finish out the week to the upside against the U.S. dollar.

10. The Japanese yen was erratic against the U.S. dollar in early trading this week, but by Tuesday had begun a relatively steep climb that saw the yen touch its highs for the week late Tuesday night. The yen retraced slightly through Thursday, then bounced briefly back near its highs before retreating again around mid-day on Thursday. The yen found support overnight and spent Friday bouncing in a narrow trading range before closing out the week slightly to the upside against the U.S. dollar.

Market volatility remains the primary concern as geopolitical and macroeconomic uncertainty continue to grow across the globe. China has ramped up its propaganda concerning the relationship between the U.S. and Taiwan, leading some analysts to believe that China may be considering making a play for the island in the wake of Russia’s invasion of Ukraine. In recent months, China has begun to argue that Washington, D.C. had signed on to China’s “One China” principle as early as 1972, when the two signed a “normalization communique.” With the Biden administration recently sending mixed signals over whether the U.S. would support Taiwan militarily in the event that China chooses to begin an invasion, China may be setting the stage for claiming that the U.S. broke the normalization deal. The U.S. has never really publicly acknowledged that it recognizes China’s “One China” policy, so China’s recently stated view that the U.S. approved of the policy as part of that 1972 normalization deal, is a complete fabrication. China is increasingly likely to take a hard stance on Taiwan, which it views as nothing more than a renegade province and not as a sovereign nation. China ignoring the rest of the Western world in favor of its own view would not be unprecedented. When the United Kingdom transitioned Hong Kong back to China, a joint declaration was made that specified how the city would be ruled following the 1997 handover. China declared that document to be nothing more than a historical document and which it claimed ceased to be enforceable following the handover.

Russia continues to make veiled nuclear threats against Western nations amid the backlash of its choice to invade Ukraine. Aleksey Zhuravlyov, leader of the nationalist party Rodina and a deputy of the Duma, said on a program on Russia-1 when asked about German Chancellor Olaf Sholz’s comments that Vladimir Putin “must not win this war” at the World Economic Forum, “It’s madness. Is this moron really thinking we could lose? Us, a nuclear nation? That tomorrow, we’ll say, ‘sorry, we made a mistake, that we will get out of Crimea and everywhere else.’ It can’t happen.” Zhuravlyov went on to say “In the end, you will be reduced to ashes. The Americans will say ‘stuff happens.’”, implying that the U.S. would not take action if Russia were to choose to carry out a nuclear strike in Europe. Olaf Scholz also mentioned at Davros that the West could not accept the terms Moscow has demanded to cease hostilities in Ukraine. Discussing this, Zhuravlyov said, “If you can’t accept our terms then we’ll force you. Scholz should know that. If you force us to use nuclear weapons, we’ll have no other choice.”

As geopolitical and economic turmoil continue to surge, many investors have held to the view that holding some physical precious metals in their portfolios might offer them some additional diversification. Precious metals have a long and storied history of maintaining a store of value during times of geopolitical and economic turmoil. Investors that side with this view have continued to look for buying opportunities, in the form of temporary price dips, that will allow them to add additional physical precious metals to their portfolios at a relative discount to other assets. 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 Compariso

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.