The Precious Metals Week in Review — January 26, 2018
1. Unsurprisingly, the U.S. Senate followed through on its threat to trigger a government shutdown by withholding enough votes last Friday to prevent the passage of yet another continuing resolution to fund the government through more and more debt. Volatility increased this week as the cryptocurrency bubble showed signs of further rupturing and the equities bubble also showed signs of nearing its own rupture.
2. The seasonally adjusted number of Americans filing initial claims for state unemployment surged by 17,000 claims to a new level of 233,000 for the week ending January 20. The previous week’s level was revised lower by 4,000 claims to 216,000. The four-week moving average of claims dropped by 3,500 to a new level of 240,000 from the previous week’s revised average. The previous week’s 4-week moving average was revised lower by 1,000 claims. Claims taking procedures in both the Virgin Islands and Puerto Rico have still not returned to 2017 pre-hurricane norms. Unemployment data should be expected to remain volatile through the first several months of the year as severe winter weather and the lingering effects of seasonal employment terminations continue to work their way through the system.
3. The U.S. Congress, specifically the Senate, allowed the Continuing Resolution that had kept the U.S. government operating through Friday, January 19 at midnight to expire. The shutdown was short-lived, just three days, and the standoff will likely be largely blamed on Republicans, when elections in November of this year. It appears to have actually been Senate Democrats that were responsible for the delay. Senate leaders reached a compromise on a deal to reopen the government on Monday after a tense three-day standoff, but the new resolution only funds the government through February 8.
4. The U.S. dollar took a sharp tumble this week as U.S. Treasury Secretary Steven Mnuchin appeared to openly support a weaker U.S. dollar through comments that he made at the World Economic Forum in Davos, Switzerland. Mnuchin and President Trump both tried to “walk back” the comments, saying that in the long-term, a stronger U.S. dollar is in the country’s best interests, but the statements did little to help the dollar get out of its slump.
5. Bitcoin continued its tumble this week, dropping below $10,000 and booking a loss of 25% on the year by Tuesday. There did not appear to be a specific news item that drove this week’s mounting losses, but new details did emerge from South Korea over its changing plans to limit trading in cryptocurrencies. The South Korean Financial Services Commission announced Tuesday that it was proposing to ban anonymous trading accounts by January 30, saying “Those who do not have their real-name accounts at the same bank with the exchanges will not be allowed to make new deposits into the exchanges’ accounts. They will be only allowed to make withdrawals.” The primary attraction of cryptocurrencies has long been the anonymity associated with them. It is becoming ever clearer that the world’s regulatory bodies are taking aim on that very anonymity and quickly maneuvering to bring digital currencies and the technology that drives them under their purview.
6. The US announced a decision this week to implement steep tariffs on washing machines and solar panels from South Korea, angering its ally to the point that Seoul said it would complain to the World Trade Organization (WTO) over the “excessive” and “regrettable” move. South Korean tech giant Samsung, who manufactures washing machines that are sold in the U.S. and elsewhere around the world, said “Everyone will pay more with fewer choices” with regards to the tariffs on residential washing machines. U.S. Trade Representative Robert Lighthizer said on Monday “The President’s action makes clear again that the Trump Administration will always defend American workers, farmers, ranchers, and businesses in this regard.” The tax on imported solar panels alone will be up to 30%. China also spoke out against the move, saying that the U.S. was “deteriorating the global trade environment”.
7. In yet another security breach demonstrating the “Wild West” state of cryptocurrencies, Japanese cryptocurrency exchange Coincheck announced on Friday that 523 million of the exchange’s coins were sent to another account by hackers at around 3 a.m. local time. At the time the theft was detected, the stolen digital currency was worth over $500 million U.S.
8. Crude oil maintained its grip on the mid-$60 a barrel range as a weakening U.S. dollar helped boost demand for fuel. Refinery maintenance season is due to begin soon and the corresponding slowdown in orders for crude oil as suppliers anticipate the production delays could trigger moderate weakness in prices in the coming months. The ongoing increase in U.S. crude production could also act to offset any benefits to oil prices that the OPEC supply cap agreements have had.
9. The euro enjoyed a near steady increase against the U.S. dollar all week, dipping briefly on Thursday as President Trump and Secretary Mnuchin were trying to do damage control over their apparent support of a weaker U.S. dollar. The corresponding dip in the euro was relatively small and it will still close the week out higher against the U.S. dollar. The Japanese yen also marched higher against the U.S. dollar this week, dipping late Thursday evening, again as Trump and Mnuchin were trying to contain the damage from their apparent support of a weaker U.S. dollar, but the dip was short-lived and the yen will also close the week out higher against the U.S. dollar.
President Trump and U.S. Treasury Secretary Steven Mnuchin made waves in Davos, Switzerland this week at the World Economic Forum discussing “America First” policies and publicly noting that a weakening dollar would be beneficial to the United States. Several Central Bank officials from Europe noted that such public statements are “not helpful” as they create increased market volatility among the world’s currencies. Both Trump and Mnuchin did their best to do damage control from the Secretary’s implication that the US was in favor of watching its dollar weaken further, but their weak “taken out of context” excuse did not do much to prop up the plunging dollar.
Continued weakness in the dollar could be a lasting problem for Europe, as they would see their exports plunge if U.S. consumers continue to see the price of imported goods increase. Pierre Moscovici, the European commissioner for economic and financial affairs, told CNBC in Davos “For the time being we see nothing which is absolutely out of control, but we need to be of course vigilant, watching it, and because we need to strike the right balance especially between the dollar and the euro.”
In Europe, the impact of the United Kingdom’s (UK) decision to leave the European Union (EU) is finally beginning to hit home to the rest of the citizens of the EU. The UK has been one of the main contributors to the pooled European budget and that comes to an end when they exit the bloc next year. The remaining EU members are finally coming to the realization that their own contributions to the European budget will have to increase in order to compensate for the loss of the UK and they are clearly not happy about the idea.
European Commission Vice President Jyrki Katainen told CNBC on the sidelines of the Davos World Economic Form that the loss of the UK’s budget contributions are “certainly a problem and we have to address it. If I should bet something, we need to adjust the budget to a certain extent but also we need fresh money from member states. We also have to look at how money is spent, how we could get more out of less.” Katainen said that the EU is looking at different methods of financing European projects, rather than asking member states to up their financial contributions — which means they are considering piling on more global debt. Many in the U.K. still fear that the “exit bill” for breaking up with the EU may turn out to be more punitive in nature, and rumors that the EU will be left with a shortfall that must be made up for do nothing to reassure those fears. The finance minister of Luxembourg said, at Davos this week, “There are many people out there who are trying to punish the United Kingdom without saying it — if you ask them they will deny it. Let’s try to be more positive, let’s try to de-dramatize the whole negotiation.”
Cryptocurrencies continued to show signs that their “wild west” days may soon be over. Bitcoin was down by 25% at one point this week, and a Japanese cryptocurrency exchange report the theft of nearly half a billion US dollars’ worth of digital currency on Friday. South Korea continued discussing the possible bans that it might put in place on virtual currencies, including the complete loss of the very anonymity that seems to make them so popular.
Equities seemed to gleefully shake off every piece of troubling news again this week, with the Dow Jones Industrial Average continuing to set new records as it moved closer to the 27,000 mark just weeks after pushing through the 25,000 mark.
As Bitcoin toppled this week, reports surfaced that investors in the virtual currency were rushing for the exits and attempting to turn to Gold as a safe haven place to store the profits they were attempting to flee with. The trouble appears to be that while so many exchanges seem to make it easy to purchase cryptocurrencies, they do not, for the most part, appear to make it easy to sell those “coins” back when investors look to book their profits.
Savvy investors recognized long ago that there was a mania surrounding anything with the words “bit”, “block” or “chain” in it and moved to book their profits well in advance of the sudden plunge. These same investors also wisely continued purchasing alternative assets to make certain that they were keeping their investment portfolios diversified against overexposure to asset classes whose bubbles had clearly risen to the bursting point. One such alternative asset frequently used as a means of diversification is physical precious metals. Investors seeking to diversify their portfolios with precious metals have continued to follow their plan of purchasing additional physical product whenever temporary price dips present them with the buying opportunities to do so.
Remember that precious metals should always be viewed as a long-term investment and that the key to profitability through the ownership of physical precious metals is to actually acquire and own the physical products and to hold them for the long term. Always remember that you should never overextend your ability to maintain ownership of your precious metals over the long term.
Trading Department
Precious Metals International, Ltd.
Friday to Friday Close (New York Closing Prices)
Jan 19th2018 Jan 26th2018 Net Change Gold $1333.50 $1353.00 19.50 + 1.46% Silver $17.04 $17.48 0.44 + 2.58% Platinum $1016.50 $1016.50 0.00 + 0.00% Palladium $1106.50 $1092.50 (14.00) — 1.27% Dow Jones 26071.72 26616.71 544.99 + 2.09%
Previous year Comparisons
Jan. 27th2017 Jan 26th2018 Net Change Gold $1190.00 $1353.00 163.00 + 13.70% Silver $17.16 $17.48 0.32 + 1.86% Platinum $ 984.00 $1016.50 32.50 + 3.30% Palladium $ 744.00 $1092.50 348.50 + 46.84% Dow Jones 20093.78 26616.71 6522.93 + 32.46%
Here are your Short Term Support and Resistance Levels for the upcoming week.
Gold Silver Support 1320/1280/1260 17.30/17.00/16.80 Resistance 1360/1380/1400 17.55/17.80/18.00 Platinum Palladium Support 1000/985/960 1080/1060/1040 Resistance 1025/1050/1075 1130/1150/1170 This is not a solicitation to purchase or sell.
© 2018, Precious Metals International, Ltd.
