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The Week in Review – June 18th, 2010

June 18, 2010

Gold hit another new record high this week, climbing above $1260 an ounce. The media continues to try to downplay the significance, but it seems investors are finally beginning to ignore the talking heads and are seeing the value in diversifying their portfolios with precious metals as fiat currencies around the world continue to devalue. Those investors astute enough to have taken the steps to diversify their portfolios when prices were “cheap” should be well pleased with the results so far. Both Gold and Silver have now separated themselves from the currency markets, the Equity markets and the Base Metals Markets and are now trading as true hedges against financial crisis (All this while inflation remains low, according to our trusted US office of statistics!!)

Factory activity growth nosedived in the Mid-Atlantic region in June according to a survey by the Philadelphia Federal Reserve Bank. Economists were expecting a reading of 20.9, down from May’s reading of 21.4 and the only thing they were right about was the fact that it was down. The reading came in at a mere 8.0, showing that manufacturing is slowing.

Initial jobless claims jumped again last week ending three straight declines. A bill that would further extend unemployment benefits failed to pass the US Senate on fears that it would simply add more to an already ballooning deficit. Falling gasoline prices helped push down consumer prices, but core consumer prices, which strip out volatile energy and food figures, rose in May by .1 percent.

The beating that everyone expected the housing industry to take after the tax credit expired is coming to pass. New home construction fell by 17.2 percent in May. Sales dropped by more than 20 percent in some areas and applications to buy houses are down by over 30 percent compared with last year according to the Mortgage Bankers Association.

According to statistics compiled by SNL Financial from US Treasury data, 91 banks and thrifts skipped the May dividend payment under the Troubled Asset Relief Program. It was the first time 23 of those banks had missed their payment, for the other 78 it was at least their second time, with some of them missing as many as 5 payments.

On Monday, Moody’s downgraded Greece government bond ratings to junk, citing risks in the euro zone/IMF bailout package. Moody’s went on to announce that Poland needed to launch fiscal reforms if it wants to keep its A2 rating.

Alan Greenspan warned in an opinion piece this week that the US capacity to borrow is not unlimited and that the government may soon have to pay higher interest rates to finance a ballooning deficit. Greenspan speculates that the only way to close the deficit would be to make politically suicidal drastic cuts, rationing medical care or raising the age for health and retirement benefits. An alternative option that would help close the deficit, according to Greenspan, would be significant inflation.

Crude oil had surged to a 5 week high of $78 a barrel, despite a rise in inventory that should have driven the price lower. The ongoing disaster in the Gulf of Mexico and concerns over the apparent economic slowdown drove the price back down to the mid-$70 range again by the end of the week.

The Euro hit a 3 week high against the dollar this week, but news out of Spain regarding a rise in bad bank debts and rising borrowing costs kept the currency from rallying further. The EU is doing their best to spin stories that Spain is in no need of a Greek style bailout, but the rumors that Spain is in deeper trouble than it appears, as rumors almost always do, seem to be stubbornly gaining ground.

Friday to Friday Close

	June. 11^th	June. 18^th	Net Change
Gold	$1230.00	$1258.00	28.00 + 2.28%
Silver	$18.26	$19.17	0.91 + 4.98%
Platinum	$1538.00	$1585.00	47.00 + 3.06%
Palladium	$446.00	$486.00	40.00 + 8.97%

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

	Gold	Silver
Support	1250/1220/1200	18.80/18.40/18.00
Resistance	1260/1280/1300	19.20/19.50/19.80

	Platinum	Palladium
Support	1550/1500/1450	470/450/425
Resistance	1600/1650/1700	500/515/525

Volatility should be expected to continue. On Capitol Hill last week, Ben Bernanke said “I don’t fully understand the movements in the gold price.” He must have one hell of a set of blinders on. People are buying gold because they are afraid. As the word “bailout” becomes commonplace and fiat currencies continue to lose their value, people are fast losing faith in the global financial system and seem to be turning toward the one asset that governments cannot simply print more of, thereby decreasing its value: precious metals. Johann Santer, managing director at Superfund Financial in Tokyo, was accumulating gold as Lehman Brothers was collapsing in 2008. People laughed and scoffed when he predicted, at that time, that gold would hit $1,500 an ounce over the next two to three years. No one seems to be laughing at him now. Credit ratings have become a joke and entire countries are at risk of defaulting on their debt. With the US deficit spiraling out of control, central banks across the globe are looking to diversify a large portion of their US dollar holdings by buying more gold. The manipulation of the gold and silver market, long thought to have been just a crackpot conspiracy theory, is now getting serious consideration and is even finally the subject of an investigation by the CFTC and the US Justice Department. The more that manipulation is exposed and discussed, the greater the chance that investors will no longer accept owning “shares” of an ETF controlled by those responsible for the manipulation as a viable way to have precious metals in their portfolio. We may be standing at the edge of the greatest rush to own precious metals in history which could be caused by instant and massive short covering by J.P. Morgan and their co-conspirators. This occurrence alone could create a massive upward price movement in Gold and Silver. It certainly appears that if there ever was a time to be aggressive in accumulating Physical Gold and Silver that time is NOW. 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. We once again leave you with one final thought: Once demand for a product outpaces its supply, the only way to obtain that limited product will be to pay a premium price for it.

Trading Department – Precious Metals International, Ltd.

This is not a solicitation to purchase or sell.

The Week in Review – June 18th, 2010
Posted by Worldwide Precious Metals on Friday, June 18, 2010

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