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The Week in Review

April 9, 2010

April 9, 2010

The Week in Review

Some old familiar names are in the news again. The Wall Street Journal reported Friday that 18 banks, including Goldman Sachs, Morgan Stanley, J.P. Morgan Chase, Bank of America and Citigroup, understated the debt levels used to fund securities trades by as much as 42 percent at the end of each quarter for the past five quarters. This had the result of making their balance sheets appear less risky than they really were. You’ll recall from previous memos that J.P. Morgan Chase has long been implicated in manipulating the precious metals markets, what a surprise that there may be some creative accounting going on!

The number of new unemployment insurance claims rose unexpectedly last week, bringing to an end a 5 week long streak of improvement. Continuing claims fell, however this number has long been suspect since benefits are expiring for many of those who have been out of work for extended periods.

The saga in Greece continues to drag on. Greece, trying to borrow from markets to ease its debt troubles, is finding the cost to do so skyrocketing. Chris Pryce, senior Greece analyst for Fitch said “Despite everything the EU and the euro zone have done there is still a lack of clarity and confusion about what they intend to do, when they intend to do it and how much would be involved.” He went on to tell Reuters “It is now up to the Greek government to go publicly to the EU and IMF and ask for the cash and the support.”

On Thursday, Federal Reserve officials again said they were committed to low interest rates for “an extended period.” They went on to say that any reduction in the size of the central bank’s balance sheet may take up to twenty years.

30-year mortgage rates rose to their highest levels in eight months due to the end of a government push for banks to keep rates down.

Crude oil continued to remain above $85 a barrel, causing speculation that the US consumer may tighten their belts again as gas prices rise for the summer.

Strong manufacturing data out of the US boosted the dollar up against both the euro and the Yen. The dollar hit a 7 month high against the Yen. Manufacturing data from other countries was also good, boosting the opinion that the recovery may finally be taking hold.

The euro continued to slide against the dollar for most of the week, while the yen edged up slightly.

China appears to be hinting that they may raise rates as early as this month, and may let the Yuan begin appreciating against the dollar by October.

In our February 5^th memo, which we consider to have been a major buy signal (which we also referred to in our March 5^th memo) the closing price of silver was $14.82. Congratulations to those of you who took advantage of those price levels to add to, or begin your precious metals portfolios! You are looking at roughly a 24% gain in just two months, and many analysts are predicting an explosive price move to the upside in the near future.

Friday to Friday Close

	Apr. 1st	Apr. 9th	Net Change
Gold	$1126.00	$1160.00	34.00 – 3.02%
Silver	$17.88	$18.39	0.51 + 2.85%
Platinum	$1665.00	$1723.00	58.00 + 3.48%
Palladium	$488.00	$514.00	26.00 + 5.33%

Here are your Short Term Support and Resistance Levels for the upcoming week.

	Gold	Silver
Support	1150/1130/1100	18.00/17.80/17.50
Resistance	1160/1190/1225	18.50/18.90/19.50

	Platinum	Palladium
Support	1700/1650/1600	500/480/450
Resistance	1720/1750/1800	515/525/550

Volatility should be expected to continue. On further analysis of the March 25^th CFTC meeting on position limits in the precious metals market, there were some interesting revelations regarding the London OTC metals exchange (LBMA). Adrian Douglas, of the Gold Anti-Trust Action Committee asserted that the volume of gold that the LBMA trades daily is so large that it cannot possibly be backed on a one to one basis by physical metal. His exact statement was “it’s fractional-reserve accounting, and you can’t trade that much gold – it doesn’t exist in the world.” Jeffrey Christian, founder of commodity consultancy firm CPM Group and supposedly one of “the world’s foremost authorities on the markets for precious metals,” surprisingly confirmed Mr. Douglas’ accusation, saying “The previous fellow was talking about hedges of paper on paper and that is exactly right. Precious metals are financial assets like currencies, T-bills, and T-bonds; they trade in the multiples of a hundred times the underlying physical and so people buying them are voting and giving an economic view of the world or a view of the economic world.” He then went on to clarify: “People say, and you heard it today, there is not that much physical metal out there, and there isn’t, but in the “physical market,” as the market uses that term, there is much more metal than that. There is a hundred times what there is.” Let’s reiterate that, since Mr. Christian said it twice himself: “100 times what there is”, meaning that paper gold represents 100 times more gold than actually exists in the market place. All it would take is for enough investors to demand delivery of physical product, in place of their paper representations, to make the prices explode through the roof. Remember, the key to profitability through the ownership of physical precious metals is to actually own the physical product and to hold them for the long term. Never over-extend your ability to maintain ownership of your product over the long term.

If you want the manipulation in the precious metals markets to come to an end we urge you to e-mail the Commodities Futures Trading Commission at this e-mail address: metalshearing@cftc.gov. Thanks to Ted Butler, you can use the following draft for your e-mail to the CFTC (remember to place your name after “Sincerely,” at the bottom):

“Dear Sirs; Thank you for the opportunity to comment on the issue of position limits for precious metals. Please establish a speculative position limit in Comex Silver of no more than 1500 contracts. Please restrict any hedging exemptions from those limits to legitimate hedgers. Please stop the levels of concentration in Comex silver futures that have been experienced over the past few years on the short side of the market. Sincerely, ______________”

The CFTC is accepting comments from the general public through to the 26^th of April, 2010. The more of us, as investors, who have and show an interest in the CFTC stopping and finally putting to a halt the manipulation that has been carried on by institutions such as J.P. Morgan Chase and HSBC, the better our chances in getting a positive reaction. Please CC your e-mails to Mr. Chris Powell, Secretary/Treasurer of Gold Anti-Trust Association at cpowell@gata.org.

Trading Department – Precious Metals International, Ltd.

This is not a solicitation to purchase or sell.

© 2010, Precious Metals International, Ltd.

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

The Week in Review
Posted by Worldwide Precious Metals on Friday, April 9, 2010

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