The Precious Metals Week in Review – June 3rd, 2022

1. Market volatility continued this week as the war in Ukraine entered its hundredth day and the Non-Farm Payrolls report was released in the U.S. Inflation continues to surge across the globe in the wake of economic shutdowns due to Covid-19, the ongoing Russia-Ukraine conflict, and ongoing supply chain issues.

2. For the week ending May 28, the seasonally adjusted number of Americans filing initial claims for unemployment decreased by 11,000 from the previous week’s revised level to reach a new level of 200,000. The previous week’s level was revised higher by 1,000 claims. The 4-week moving average of claims was 206,500, a decrease of 500 from the previous week’s revised moving average. The previous week’s moving average was revised higher by 250 claims.

3. The U.S. Non-Farm Payrolls Report for May was released on Friday and the results were better than expected. The U.S. economy added 390,000 jobs in May, well above the 328,000 Dow Jones estimate. The unemployment rate held at 3.6%, just above the lowest reading since December of 1969. A broader measure of unemployment that takes into account those individuals that are not actively looking for work edged higher in May, however, pushing to 7.1% which is slightly higher than April’s reading. Revisions to both March and April’s estimates cut 22,000 total jobs from those previously reported readings.

4. The Federal Reserve holds its next Federal Open Market Committee meeting beginning June 14 and will thus begin a “blackout period” where Fed members will forego speaking publicly about possible monetary policy moves. This will likely mean that next week we will see a dearth of public comments by Fed members, unlike in the previous two weeks. This week, Fed Governor Christopher Waller noted that he expects the Fed’s 50 basis-point interest rate hikes to continue into the foreseeable future. Waller also noted that he would support continuing to hike well past the so-called “neutral” level which is currently around 2.5% for the Fed’s benchmark borrowing rate. Fed Vice Chair Lael Brainard concurs, telling CNBC on Thursday that she did not see the central bank halting its rate-hiking cycle any time soon. Some Fed officials have proposed taking a step back from hiking rates in September, but Brainard seemed to hint that rates could keep moving higher, even then.

5. U.S. Treasury Secretary Janet Yellen in an interview with CNBC’s Becky Quick on Thursday noted that in a recent meeting with him, “The president emphasized his intention to do everything he can to lower the costs that Americans face for important items in their budget.” Yellen went on to note that the President will require help from the Fed, saying “The Fed has a dual mandate and it is maximum employment and price stability. I think that is the way it’s phrased in the law. But we are at full employment. We have a very strong labor market. That’s been achieved, but inflation is way too high, and it’s really a big burden on American households. And so maintaining full employment while bringing inflation down, that’s the president’s priority and I believe that’s consistent with how the Fed sees its programs.” In an earlier interview during the week with CNN’s Wolf Blitzer, Yellen, who chaired the Federal Reserve before Jerome Powell, said “I think I was wrong then about the path that inflation would take. There have been unanticipated and large shocks that have boosted energy and food prices, and supply bottlenecks that have affected our economy badly that I…at the time, didn’t fully understand.”

6. Turkey saw its inflation rate for the month of May soar, rising by 73.5% year on year, the highest jump in 23 years. Skyrocketing food and energy costs combined with President Recep Tayyip Erdogan’s monetary policy decisions are largely being blamed for the jump. Erdogan has steadfastly refused to raise rates as inflation has surged, declaring himself a “sworn enemy of interest rates.” Food prices in Turkey alone have surged over 90% year on year according to the country’s statistics agency. Economists fear that Turkey’s spiraling inflation woes will only get worse moving forward, possibly topping 80% year on year in the third quarter of 2022.

7. OPEC+ is showing signs of falling apart as Russia continues its aggression against Ukraine. The alliance announced that it would work to quickly increase oil production by 648,000 barrels per day in July and August to end output cuts earlier than they had previously agreed to. The issue with their announcement is that countries within the alliance are already failing to meet output targets. Paul Sankey, of Sankey Research, said “The whole system of OPEC has kind of broken down right now,” noting that while OPEC can typically influence prices with its production announcements, this time the market seems to see supply issues continuing in spite of any potential output boosts. Brent crude settled at $119.41 per barrel while West Texas Intermediate crude continued closing the gap, settling at $118.67.

8. The euro had a bit of a rollercoaster ride this week, struggling higher against the U.S. dollar at the start of the week, then dipping into negative territory by Tuesday. The euro tried to regain positive ground late Tuesday afternoon but could not maintain momentum and moved basically sideways near its opening levels for the week. Late Wednesday afternoon, the euro plunged near vertically, hitting its lows for the week and bouncing along sideways from there through Thursday morning trading. On Thursday the euro managed to reverse course, climbing sharply higher and moving back into positive territory. As Friday trading began, the euro started fading again, bouncing back into negative territory briefly, then remaining near its opening levels for the week for the rest of the trading day. The euro could not quite manage to make the leap back into positive territory and will finish out the week slightly to the downside against the U.S. dollar.

9. The Japanese yen started the trading week out moving relatively sideways against the U.S. dollar before embarking on a fairly steady downward trend that lasted through Wednesday, late in the day. Overnight on Thursday, the yen tried to rally somewhat, but could not quite gain any upward momentum and began drifting lower again as it moved into Friday trading. The downward move accelerated as Friday wore on and the yen will finish out the week to the downside against the U.S. dollar.

While the U.S. Non-Farm Payrolls Report for May was better than expected, markets still tumbled this week after its release on Friday. There are still more job openings than employees that are willing to fill them, and risking wages continue to fail to keep up with surging inflation in nearly every sector. Food, energy, transportation, and automotive all have seen dramatic increases due to the ongoing conflict in Ukraine and continued Covid-19 shutdowns that have recently reignited fears over global supply chain reliability. Food prices in Turkey have reached near-crisis levels, and Africa is highly likely to follow suit. In the U.S., where President Biden has urged farmers to take up “double cropping” in an effort to increase yields and offset some of the loss of agricultural output from Ukraine, Belarus, and Russia, many of its farmland regions are facing severe drought conditions which may prevent them from being able to do so. In Southern California, sweeping restrictions on outdoor water use are going into effect that will impact more than 6 million residents. The phrase “megadrought” has been coined to describe the ongoing drought, which has lasted for decades and now affects multiple states in the western portion of the U.S. including Texas and Arizona.

As geopolitical and economic turmoil continues to escalate around the world, market uncertainty and therefore market volatility can be expected to continue. Many analysts continue to maintain that portfolio diversification is key in such an environment in order to offer at least some protection against corrections across multiple market sectors. Many of these analysts also continue to recommend holding a percentage of precious metals in an investment portfolio as a means of diversification. Many investors have continued to seek out buying opportunities in the form of temporary price dips that would allow them to add physical precious metals to their portfolios at a relative discount compared to other asset classes. Physical precious metals have a long and storied history of becoming the “safe haven” play of choice when geopolitical and economic turmoil rear their ugly heads and many investors continue to hold to that viewpoint. 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)

Month End to Month End Close

Previous year Comparison

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.