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The Week in Review – May 28, 2010

May 28, 2010

May 28, 2010

The Week in Review

Another dramatic week comes to a close. The Dow spent most of the week heading downward, closing below 10,000 Wednesday before rebounding on the opening Thursday. Even though the stock market managed to close higher Thursday, it appears that it may take another triple digit loss today and is therefore on track to produce the worst May since 1962.

New applications for unemployment edged lower, but the job market is still failing to take off as much as analysts are hoping. Congress is still debating a bill that would extend jobless benefits to the unemployed. The current incarnation of the bill would add another $90 billion to the steadily ballooning deficit.

Consumer spending in April was the worst since September 2009 despite a gain in disposable income. Analysts, expecting a modest increase in spending, regrouped and predicted that the increase in disposable income may lead to higher spending in the second quarter.

The poor showing in consumer spending was also paralleled in the business sector. The US economy grew at a much more modest pace than expected in the first quarter due to cuts in spending by state and local governments and a cutback in business spending.

Greek labor unions are planning to strike in June to protest austerity measures and are hoping to get other workers across Europe to do the same. It may not be that hard for them to convince workers in the Eurozone to join in the protests; workers across Europe have been calling for such a move as Spain, Italy and Portugal plan and begin to implement their own austerity measures.

As furor over the ongoing oil disaster in the Gulf of Mexico continued, president Obama announced a 6 month slowdown on new drilling in the US. BP has finally admitted what everyone suspected all along, the flow of oil has most likely been up to as much as 25,000 barrels a day. The spill has now become the worst oil spill in US history and it looks like it will have far-reaching consequences for years. Oil prices have been tumbling since shortly after the accident, and the stocks of those companies involved in the oil industry have taken a severe beating. Crude did manage to rally back above $75 a barrel by Friday.

The Euro had another bumpy ride, but overall continued its downward trend against the US dollar and other currencies. The Japanese Yen has been taking the opposite track, climbing against the dollar in opposition to the Euro.

A new survey by the TABB Group showed that the traders on Wall Street themselves have lost confidence in the structure of the US equities markets since the “flash crash” episode.

Friday to Friday Close

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

Volatility should be expected to continue. As the Euro continues to spiral down towards parity with the US dollar, every comment out of the Eurozone seems to move the equities markets. More and more analysts are declaring that gold is headed higher as fiat currencies continue to devalue as the financial meltdown goes on. China managed to buoy up the Euro, at least temporarily, by declaring its support for the currency and stating that it was not looking for ways to divest its Euro holdings as everyone has been speculating. As the crisis in Europe continues, however, more and more investors appear to be fleeing the euro and many of them seem to be seeking safety in precious metals. Geo-political tensions continue to flair between North and South Korea, and the US is already involved, sending ships to do joint maneuvers with the South Korean navy as well as 24 stealth fighters to Japan and Guam. Predictably, the US Air Force declared that the deployment of those fighters was “already scheduled and is not a response to any specific situation in the region.” Ben Davies, CEO of Hinde Capital said: “Gold should be viewed not as a commodity, but as a cash supplement. There’s been such proliferation of currency, as a consequence gold is very undervalued.” Dennis Gartman, who has long been telling everyone that he is not a “gold bug” and was in fact advising investors to get out of their gold last week, has now declared that the “sell off” is over and that he believes gold will be going higher. Those of you who, as we mentioned in our May 21 memo, took advantage of the price dips brought on by the ongoing panic in the marketplace to add additional precious metals to your portfolio may well be pleased with that decision soon. On Friday, Fitch downgraded Spain’s credit rating to AA+ from AAA, which sent another wave of panicked selloffs through the Euro. Remember, the key to profitability through the ownership of physical precious metals is to actually own the physical products and to hold them for the long term. Never over-extend your ability to maintain ownership of your product over the long term.

Trading Department – Precious Metals International, Ltd.

This is not a solicitation to purchase or sell.

© 2010, Precious Metals International, Ltd.

© 2012, Precious Metals International Ltd.
www.wwpmc.com

The Week in Review – May 28, 2010
Posted by Worldwide Precious Metals on Friday, May 28, 2010

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