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The Week in Review – May 7, 2010

May 7, 2010

The US Stock Market suffered its largest intraday loss ever on Thursday, at one point down 998.50 before rebounding to close, still down about 350 points. The trade is widely being blamed on either a “software glitch” or a “fat fingered trader”, but the damage is done. Jittery investors now see a potential for the market to be “gamed”. Markets around the world headed downward as they opened following the New York close Thursday afternoon.

Retail sales were weaker than expected in April. Battle weary consumers, still fearing for the stability of their employment are continuing to hold on to their cash. Thursday’s madness in the stock market could very well reinforce the desire to hoard cash.

Dick Bove, of Rochdale Securities, released research showing that US banks such as JPMorgan Chase, Morgan Stanley and Citigroup have massive exposure to the debt crisis escalating in Europe. Riots continued in Greece as their parliament voted to approve austerity measures that will be required for them to access the bailout package put together by the European Union. According to Bove, there is “a growing recognition that Greece has got to default.” He went on to say “the riots in the streets showed the decision to repay the debt was not going to be made by the people in Germany, France and Switzerland. It’s going to be made by the people in Greece and they’re not going to repay it.”

Jean-Claude Trichet said no less than three times on Thursday that “Greece would not default” on its debt. There is one problem with Mr. Trichet’s statement: Neither he, nor anyone else at the ECB has a say in whether Greece decides to take such a step. If Greece decides that the best or only course of action is to default on their debt, then they will.

Jobs data for April showed US employment grew at the fastest pace in four years, adding 290,000 jobs. Despite the news, unemployment rose to 9.9% presumably as discouraged individuals who had previously stopped searching for work, and therefore fallen out of the measurement criteria, once again began trying to find employment.

Rocked by the ongoing disaster in the Gulf of Mexico, crude oil dropped back under $80 a barrel. All offshore drilling permits have been suspended in the US until an investigation is complete, and states such as California that had been contemplating allowing drilling off their coasts have now changed their stance.

The Euro continued its fall against the dollar; in fact currencies across the board, with the exception of the yen, were down against the dollar following Thursday’s madness.

Lloyd Blankfein, CEO of Goldman Sachs Group is under fire with many calling for him to step down. This is just further evidence that Wall Street, and those who excel at making their firms profitable are being targeted and used as scapegoats by an ineffective US administration and an equally ineffective US Congress. The rhetoric spewing forth from Washington has been the same for months “Wall Street Is Evil and It Must Be Punished!” We expect the witch hunt to accelerate in the lead up to the November elections as the current crew in Washington tries to divert attention from the still increasing unemployment numbers.

Friday to Friday Close

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

Platinum Palladium

Volatility should be expected to continue. If you were wise enough to have diversified your portfolio with precious metals prior to Thursday’s madness, congratulations. On Wednesday, silver started moving downward and when it reached about 17.05, several of our dealers queried us as to what actions they should take. Our response was: “you might want to have your customers buy as much as they can afford on this dip.” As the stock market spiraled downward Thursday, gold and silver held their own, and gold even moved upwards. In the aftermath on Friday, precious metals prices renewed their climb, with silver even rallying back to close at 18.40, as investors sought safe havens to store their hard-earned money. Many in the media even went so far as to say “the smart money was already in gold when the market dropped yesterday.” The situation in Europe, as we mentioned in our April 30 memo, is far from becoming stable. The UK elections have resulted in a “hung parliament” meaning it may be weeks or even months before they can effectively begin to govern. The Greek people are rioting in the streets over the austerity measures that their own parliament was basically forced to pass in order to receive aid from the IMF and the rest of the EU. Many are speculating that the Greek government is on the verge of being thrown out, and that there is a very real possibility that if that happens, the country will default on its debt. The contagion is spreading throughout the whole Euro Zone, and there is speculation that it will even spill over into the US and even Japan. As the chaos and contagion spreads, more and more analysts are still calling for precious metals to explode to the upside. If you have not yet begun your precious metals portfolio, or have not yet diversified your current portfolio with precious metals, you may be risking your hard-earned investment money if the stock market decides to plummet again and the media once again starts repeating “the smart money was already in precious metals.” 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.

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

The Week in Review – May 7, 2010
Posted by Worldwide Precious Metals on Friday, May 7, 2010

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