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The Week in Review – June 25, 2010

June 25, 2010

The Week in Review

It was another rollercoaster ride in the stock markets this week. Questions over what language is actually contained in the upcoming Financial Regulation Reform bill, a poor showing in the retail and housing sectors and a drop in durable goods orders all helped beat the stock market down.

There seems to be a growing sense that the wheels are about to come off the recovery train. Declining home sales data, stubbornly high unemployment, and an administration and Congress that seem as if they are becoming further and further detached from their constituents are causing consumers to once again begin hoarding their hard earned cash.

Initial claims for unemployment dropped last week by more than expected. On Thursday, a plan to provide additional aid to jobless workers whose benefits have expired was defeated in the Senate. The bill was defeated due to the fact that it would increase the already staggering budget deficit even further.

On Wednesday a report came out showing that new single-family home sales hit a record low in May after the homebuyer tax credit expired, dropping 32.7 percent to the lowest level in over forty years. April and March sales data were revised downward as well, showing that the homebuyer tax credit did not actually do as much to boost the housing industry as previously thought. Mortgage applications have also nosedived since the tax credit expired, despite record low interest rates on new mortgages.

The fed once again renewed its vow to hold interest rates “exceptionally low for an extended period” on Wednesday. They also revised their assessment of the recovery saying “Financial conditions have become less supportive of economic growth on balance, largely reflecting developments abroad.”

A Wall Street Journal-NBC poll showed Obama’s approval rating has slipped to 45%. The embattled administration continues to fail to make headway against public opinion over the current status of the country. The continuing disaster in the Gulf of Mexico is beginning to have what may prove to be a far-reaching impact not only on the environment but also on the economies of every state whose coast touches the Gulf. At a time when the government is trying their best to stimulate consumers into spending, those in the affected areas are holding on to any cash they have left due to glitches in the claims process with BP.

In an annual poll of central banks performed by UBS, 22 percent of the officials polled said that the most important reserve asset in the next 25 years would be gold. Many of the 80 central bank managers polled also said that gold would be the best performing asset class in the next six months. Saudi Arabia’s central bank decided to disclose that they had nearly doubled their gold holdings, and that most of the purchasing had been done back in 2008. That they hid the fact for so long, and choose to disclose it now, leads one to wonder how many other countries are hiding their accumulation of gold. The only reason for such a move would be to allow accumulation of further gold reserves while keeping prices artificially low.

Crude oil managed to stay fairly stable for the week, hovering in the mid-$70 a barrel range despite setbacks in the Gulf of Mexico cleanup proceedings and another rise in inventory.

The euro managed to trade sideways for much of the week, but continuing dire news out of Europe is still weighing on the embattled currency. The latest news comes from the UK, where the austerity measures being proposed by the government are being called “courageous”.

Friday to Friday Close

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

Volatility should be expected to continue. How long have we heard interest rates would be “near zero for an extended period”? The most recent Fed meeting made it sound like we would be hearing that for the foreseeable future. The bottom line is that there are too many other factors involved now for the “easy money” approach to solve all of our problems. Over a trillion dollars in stimulus has been dumped into the economy, and many feel that the effort has been nearly pointless. The Obama administration and a Congress that is out of touch with the people most affected by the continuing economic woes are pondering higher taxes which will most likely crush any hope of job expansion for companies, or spending sprees by consumers. Ted Butler has been trying to expose manipulation of the silver market by JPMorgan and others for years and his accusations have been met with complete silence by those involved. Not even a denial or a demand that he retract his statements, in fact, after bringing the silver market down to a low of $18.08 on Thursday, “Da Boyz” (as Ed Steer refers to JPMorgan, et.al.), were unable to keep the market down. As of this writing, silver is up $1.04 from yesterday’s low. There must be some serious short covering taking place! Countries are hiding the fact that they are accumulating precious metals reserves as evidenced by the fact that Saudi Arabia did not announce the increase to their own gold reserves until two years after it took place. The “FinReg” bill debate came to an end in the early morning hours on Friday and it looks like the final result of all the new regulations is going to be higher costs for the consumer. Dick Bove, banking analyst at Rochdale Securities, had this to say “I talked to the CEO of one of the five largest banks in the country… I said ‘this bill is going to knock 33 percent of your customers out,’ he said ‘you’re crazy, Dick, it’s going to be 20 percent,’” Bove went on to say “The point is that the banks can get this money back, the consumer can’t.” Obama may get his wish and have his 1500+ page “FinReg” bill in the near future, with the end result that banks will tighten lending requirements and therefore tighten credit even further. Owning physical precious metals is looking more and more attractive to astute investors as banks, Wall Street, and the US government jockey for position over who owns the rights to take the consumer’s money away from them: banks in the form of higher fees, Wall Street in the form of obscure smoke and mirrors financial derivatives, and the government in the form of skyrocketing taxes. 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 – June 25, 2010
Posted by Worldwide Precious Metals on Friday, June 25, 2010

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