The Precious Metals Week in Review – July 8th, 2022

1. Market volatility continued unabated this week, despite the shortened trading week due to the Independence Day holiday in the U.S. Leaders around the world faced backlash for struggling economies this week, with some even forced to step down by their restive constituents.

2. For the week ending July 2, the seasonally adjusted number of Americans filing initial claims for unemployment climbed by 4,000 from the previous week’s unrevised level to reach a new level of 235,000. The 4-week moving average of claims was 232,500, an increase of 750 from the previous week’s unrevised moving average.

3. On Friday, the U.S. Non-Farm Payrolls Report for June was released and was better than expected. The U.S. economy added 372,000 jobs in June, beating the 250,000 estimates. The official unemployment rate stayed steady at 3.6%, unchanged from May and in line with estimates. An alternative measure of unemployment which includes discouraged workers that are not actively seeking employment, and those holding part-time jobs for economic reasons, fell to 6.7% from 7.1%. May’s previously reported figures were revised lower to 384,0000 while April’s job count was also revised lower, down to 368,000.

4. 67-year-old former Japanese Prime Minister Shinzo Abe was brutally assassinated while giving a speech on a street in Nara. Abe was speaking in support of his party’s candidates in the upcoming elections for the upper house of Japan’s legislature. While Abe had stepped down as Japan’s Prime Minister due to health reasons, he still held considerable sway, particularly on national security and economic policies. He was the longest-serving Prime Minister in Japan’s history. Japan has some of the strictest gun laws in the world and available weapons are limited to shotguns and air rifles. Abe’s assassin apparently had hand-built the weapon that was used in the attack and when taken alive at the scene, told investigators that he was “dissatisfied” with the former Prime Minister.

5. Russian President Vladimir Putin, who has repeatedly said one of the goals of his “special military operation” in Ukraine was to save the Ukrainian people from their leaders, said this week that Russia would fight in Ukraine until the “last Ukrainian is left standing,” seemingly reversing his claims to “assist” them. The remarks were made during a speech to parliamentary leaders in which Putin said that Russia was “just getting started” with the war in Ukraine, which has now been going on for over four months. Putin also said “We have continuously heard that the West is ready to fight with us until the last Ukrainian is left standing. This is a tragedy for the Ukrainian people. However, it seems like everything is going towards this.”

6. Further escalating tensions between the U.S. and Russia this week, Vyacheslav Volodin, speaker of the Russian State Duma and considered a close ally of Vladimir Putin, said during a parliamentary session on Wednesday said “Let America always remember, there is a part of [Russian] territory: Alaska. So when [U.S. lawmakers] attempt to appropriate our assets abroad, they should be aware that we also have something to claim back.” Deputy Speaker Pyotr Tolstoy has made similar remarks, suggesting that a referendum should be held among Alaskans about the possibility of the state rejoining Russia. Alaskan Governor Mike Dunleavy responded simply with “Good luck.”

7. As fears in Germany continue to rise that Russia could literally “turn off the tap” on its gas supplies as winter approaches, a city official in Hamburg, Germany’s second-largest city, warned that “warm water could only be made available at certain times of the day in an emergency.” In Saxony, an eastern German state, residents were told by their housing association that they could only take hot showers between 4 am and 8 am, 11am and 1pm, and 5pm and 9pm each day. Rationing has not been limited to just hot water apparently. Officials are asking city councils across the nation to turn off traffic lights at night, stop illuminating historic buildings, and turn air conditioning higher in an evert to begin conserving electricity. The rations have been proposed to allow German gas reserves to be topped off before winter begins. German gas reserves are apparently only at 62% capacity at the moment. The Nord Stream 1 pipeline from Russia is currently only flowing at 40% of maximum capacity which is making it difficult for Germany to target a goal to have 90% of the storage capacity of its gas reserves filled by November.

8. British Prime Minister Boris Johnson announced his resignation as Conservative Party leader on Thursday following a flood of government resignations and a revolt among his Cabinet. His critics have called for him to be pushed out of the Prime Minister position as soon as possible and for Deputy Prime Minister Dominic Raab to become acting Prime Minister while the search begins for Johnson’s replacement. It is likely that the Prime Minister position in the U.K. will not be filled until September.

9. In Sri Lanka over the weekend, thousands of protestors took to the streets in the capital, Colombo, and seized the fortified residences of both the President and the Prime Minister, setting fire to one of the structures. Both officials offered their resignations, and the opposition political parties were to meet on Sunday to agree on a new government. The stark images of thousands of people storming the Presidential palace in protest over Sri Lanka’s ongoing economic crisis likely have the rest of the world’s leaders on edge. Sri Lanka’s economic meltdown has triggered shortages of essential items, with people struggling to find food, fuel, and daily necessities.

10. Oil remained volatile this week and despite climbing roughly 2% in Friday’s trading session, was still headed for a weekly decline as analysts continued to fret about a downturn in demand triggered by a potentially looming global recession. Brent crude posted a weekly decline of roughly 4.1%, settling at $107.02 per barrel while West Texas Intermediate posted a weekly loss of 3.4% to settle at $104.79 per barrel.

11. The euro drifted sideways against the U.S. dollar through after-hours trading over the U.S. Independence Day holiday but dropped sharply lower on Tuesday during the late morning. The plunge halted around mid-day, with the euro drifting sideways again into Wednesday. Late Wednesday afternoon, the euro dipped lower again, but the drop was shallow, and it resumed yet another sideways trend that lasted all the way into Friday’s trading session. Late Friday morning, the euro dipped to its lowest point of the week, but the bounce lower was brief, and the euro quickly returned to its previous level. The euro finished out the week to the downside against the U.S. dollar.

12. The Japanese yen had a bit of a relative wild ride this week, drifting slightly higher against the U.S. dollar over the U.S. Independence Day holiday, then moving lower in a series of shallow steps through Tuesday. Early on Tuesday, the yen struggled its way higher, returning to its opening levels. Late on Wednesday, the yen began moving lower again, drifting shallowly to the downside through Friday morning. On Friday morning, the yen spiked higher, but quickly reversed and even touched its lows for the week briefly before returning to its previous level and resumed drifting lower into the close. The yen closed out the week to the downside against the U.S. dollar.

Geopolitical turmoil continues to escalate as the world’s economies struggle to overcome the shortages brought about by both the ongoing global pandemic and Russia’s unprompted invasion of Ukraine. China continues to crack down on its citizens under its “Zero Covid” policy, which has been exacerbating the global supply chain crisis as ports backup and shipments fail. In Ukraine, Russia continues to commit atrocities, striking yet another apartment building in eastern Ukraine, leaving at least 15 civilians dead and possibly as many as 20 trapped underneath the rubble. Andriy Yermak, chief of staff to Ukrainian President Volodymyr Zelenskyy, said in a post to social media service Telegram that the strike on Saturday was “another terrorist attack,” and called for Russia to be designated as a state sponsor of terrorism for the ongoing strikes on civilian targets.

In the U.S., the latest Non-Farm Payrolls report for June came in better than expected, but new inflation data is expected to be released next week and the start of “earnings season” for the second quarter could trigger further volatility among market sectors. On Wednesday, the consumer price index (CPI) for June is expected to be released and current projections put the index, including volatile food and energy in the calculations, above May’s 8.6% reading. Peter Boockvar, chief investment officer at Bleakley Advisory Group, said “The headline is expected to be higher. That’s mostly because of energy. The question is to what extent the moderation in goods prices is going to be offset by continued increasing services prices, predominantly driven by rent. The government stats still have a lot of catchup room to the upside on rent.” Thursday and Friday will also see the release of the producer price index (PPI) and the initial reading on the University of Michigan’s consumer sentiment report. June retail sales are also expected to be released on Friday. The Federal Reserve will likely be closely watching market reactions to the data next week as it plans its near-term monetary policy moves. Most analysts expect the Fed to continue hiking rates, perhaps even conducting another 75 basis-point moves when it meets next.

As geopolitical and economic turmoil escalates around the world, investors continue to try to take steps to ensure that their portfolios are well-diversified. Many analysts continue to recommend holding precious metals in at least a portion of any well-diversified portfolio. Many investors have continued to take advantage of recent temporary price dips to add more physical precious metals into their portfolios to aid in their diversification goals. Always remember, however, that one of the keys to profitability through the ownership of physical precious metals is to acquire the physical product and hold on to 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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