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Memo to All Retail Dealers

April 30, 2009

PMI Issues Strong BUY Recommendation

Today, we close out what would be an understatement to describe as an extremely interesting month. In our opinion, this week alone has shown that the stock market is trading entirely on emotion, rising higher despite wave after wave of bad news and is now primed for the current “Bear Market Rally” to come to an end. Even Thursday’s announcement of Chrysler’s bankruptcy filing couldn’t shake the market all morning. It was only after Mr. Obama came out and made his remarks that the market started to turn down.

Let’s examine some of the key remarks from Mr. Obama’s speech regarding the Chrysler situation. The president praised the auto worker unions, management, dealers and lenders (including JP Morgan Chase) for making major sacrifices. He then went on to attack “a group of investment firms and hedge funds” that held out “for the prospect of an unjustified taxpayer-funded bailout.” To quote further: “Some demanded twice the return that other lenders were getting. I don’t stand with them. I stand with Chrysler’s employees and their families and communities. I stand with Chrysler’s management, its dealers and its suppliers. I stand with the millions of Americans who own and want to buy Chrysler’s cars.”

The above remarks by Mr. Obama come perilously close to implying that speaking out and trying to minimize the losses of your investment in stocks and bonds is, quite simply, un-American. Chrysler was driven to the POINT of bankruptcy by a series of poor decisions by management and labor unions that have winnowed away the profit potential of nearly every American auto company in existence. They were driven INTO bankruptcy by the Obama administration’s imposed deadline. The investors that showed their support for the company by buying its bonds, hoping for the promised “turnaround”, are now expected to take their beating, kiss their investments quietly goodbye in a bankruptcy imposed by the federal government and say “thank you” instead of fighting to protect as much of that investment as they can.

Oil has been testing the $50.00 range all month, but has so far been unable to sustain the price amid fear that the Influenza AH1N1 virus (The US government, pressured by the pork industry has essentially mandated to the World Health Organization that it can no longer be called “Swine Flu”) would cause a reduction in demand.

The Dollar has had another mixed month but overall is down for the month against both the Euro and the Yen. We still believe the dollar is reaching a point for the potential of a strong reversal to the Downside in the very near future.

Last week saw a turnaround of the price pullback that we’ve been experiencing in precious metals over the last several weeks on news out of China. China announced that it had not only been buying Gold since 2003, but that it had increased its holdings by roughly 75% over the six year period. According to the World Gold Council, this gives China the 5th largest Gold reserves by country, and it looks like they need more. China has the largest holdings of foreign exchange reserves in the world (1.95 Trillion as of March 31) and yet they are 5th on the list of Gold reserves. If they are looking to continue to increase Gold as a proportion of some of those foreign exchange reserves as a defense against a weakening dollar, it could trigger further price moves to the upside as other Central Banks in Asia start looking to reduce their own exposures to a weakening dollar as well.

The above news, combined with loud rumblings for a new world currency (rumblings begun by China prior to the G20 meeting) have fueled a debate by some economists as to whether something similar to the old “Gold Standard” should be enacted again. UBS calculates that the U.S. reserves of gold are so small, relative to the monetary base, that a price above $6,000 an ounce would be needed to reintroduce a gold standard. To implement that standard in Japan, China AND the U.S., the price would be more than $9,000 an ounce.

We leave you with this excerpt from an essay titled “Gold and Economic Freedom” written by Alan Greenspan in the 1960’s: “Under a gold standard, the amount of credit that an economy can support is determined by the economy’s tangible assets . . . [but] in the absence of the gold standard . . . there is no safe store of value,” Greenspan pointed out that without a gold standard in place, there is little to prevent governments indulging in wild credit creation. “Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights.”

Friday to Thursday Close

	April 24th	April 30th	Net Change
Gold	$913.00	$890.00	($23.00 -2.52%)
Silver	$12.92	$12.30	(62¢ -4.80%)
Platinum	$1185.00	$1100.00	($85.00 -7.17%)
Palladium	$235.00	$219.00	($16.00 -6.81%)

Month End to Month End close

	March 31st	April 30th	Net Change
Gold	$924.00	$890.00	($34.00 -3.68%)
Silver	$13.02	$12.30	(72¢ -5.53%)
Platinum	$1125.00	$1100.00	($25.00 -2.22%)
Palladium	$218.00	$219.00	+$1.00 +0.4%

Year to Date

	January 2/09	April 30/09	Net Change
Gold	$874.50	$890.00	+15.50 +1.78%
Silver	$11.14	$12.30	+1.16 +10.42%
Platinum	$935.00	$1100.00	+165.00 +17.65%
Palladium	$188.00	$219.00	+31.00 +16.49%

Short Term Support and Resistance levels

	Gold	Silver
Support	880/865/848	12.15/11.95/11.80
Resistance	900/926/940	12.45/12.60/13.00

	Platinum	Palladium
Support	1100/1080/1060	215/207/202
Resistance	1120/1160/1210	230/248/260

We feel that May should produce higher prices for the Precious Metals as we are continuing to see increased demand for Gold and Silver. Rumors abound that the European Central Bank will renew the Central Bank Gold Sales Agreements (CBGA) pact for a third time. This pact limits sales of Gold by its signatories to 500 tons per year. This, in concert with China’s desire to purchase more Gold and the IMF’s statements that it would sell 403.3 tons of Gold within the framework of the CBGA (possibly to China!) could all lend significant support to prices.

Remember: Stay pro-active, take advantage of any price dips that may occur but NEVER overextend your ability to own and hold for the Long Term.

Trading Department – Precious Metals International, Ltd.

© 2010, Worldwide Precious Metals.
www.wwpmc.com

Memo to All Retail Dealers
Posted by Worldwide Precious Metals on Thursday, April 30, 2009

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