Newsroom

The Week in Review – July 16th, 2010

July 16, 2010

What a news filled week! The US Senate gave final approval to the Frank-Dodd bill (commonly referred to as FinReg) on Thursday. Wall Street seemed to view the event as a bit of a relief, despite the fact that over 70% of the country has no idea what is even contained in the controversial bill. The bill will now make its way to Obama’s desk for what is sure to be an elaborate and overly dramatic signing ceremony sometime next week. The “hope and change” phrases Obama is sure to weave into the flowery speech for the auspicious occasion may come back to bite him, however. Many analysts think that banks will simply pass on the additional costs imposed on them by the new bill to the customer, much the same way that the credit card reforms simply caused card companies to raise their fees and lower their credit limits.

The minutes for the Federal Reserve’s June 22-23 meeting were released this week and show that the Fed is concerned over the faltering recovery. The Fed apparently feels that they should be ready to consider additional steps to take to boost the economy if the recovery continues to slow down. Sounds like the Fed is warming up the printing presses again, though it seems that it doesn’t matter how much money they print since the banks aren’t lending it out.

New claims for jobless benefits fell to their lowest level in almost two years last week. The figure was somewhat padded by the fact that some US automakers are keeping their plants open during the annual re-tooling shutdown due to demand for some models, a questionable decision since auto sales declined last month. Continuing to skew the numbers is the fact that many of the unemployed no longer qualify for benefits, and have therefore fallen out of the measurement statistic.

Retail sales fell for the second straight month in June, despite the fast approaching school year. Retailers, who have already resorted to slashing prices to draw customers to their storefronts, are going to be hard pressed to come up with new ways to bring in the battered consumer.

Demand for home loans fell to a 13 year low last week despite near record low mortgage rates under 5%. Refinancing applications were down as well as continued high unemployment and talk of a faltering recovery kept the consumer cautious. The latest saga in the housing crisis is that Homeowner Associations are able to foreclose on homes (and are doing so) faster than the banks that own the mortgages on them! Some homeowners are losing their homes to Homeowner Associations over missed payments totaling less than one month’s worth of their mortgage payment. Such occurrences are helping crush housing prices further in the areas where they are taking place.

Late Thursday the Securities and Exchange Commission and Goldman Sachs announced that they had reached a settlement in the recent fraud case. Both sides are declaring victory: The SEC declared it a win for forcing Goldman to pay a record setting fine of $550 million, Goldman declared it a win due to the fact that they won’t have to actually admit to committing fraud.

Prior to the Goldman news, and an announcement by BP that oil was no longer flowing into the gulf, the stock market had reversed its recent rally on disappointing economic news which seemed to reinforce that the recovery would continue to slow in the second quarter.

Crude oil remains bound in the mid-$70 a barrel range. Progress in the Gulf of Mexico disaster had BP’s shares on the rise again, and two potential storm systems seem to be lending support to prices.

The Euro continued to gain ground on the dollar this week on news that the Sovereign Debt Crisis in the Eurozone seemed to be stabilizing somewhat.

Friday to Friday Close

	July. 9th	July. 16th	Net Change
Gold	$1209.00	$1190.00	(19.00) – 1.57%
Silver	$18.05	$17.84	(0.21) – 1.16%
Platinum	$1530.00	$1516.00	(14.00) – 0.92%
Palladium	$455.00	$452.00	(3.00) – 0.66%

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

	Gold	Silver
Support	1185/1175/1150	17.70/17.50/17.20
Resistance	1220/1230/1250	18.50/18.75/19.00

	Platinum	Palladium
Support	1500/1475/1450	440/425/400
Resistance	1540/1560/1600	475/500/520

Volatility should be expected to continue if not increase. Refer back to our June 17 memo regarding the “Summer Dulldrums” in which we stated that we expected surprises to drastically affect the market this summer, unlike summers past. Obama will sign the Frank-Dodd financial reform bill into law sometime next week and as institutions start ramping up to make the changes that the new law will require of them, things may get crazy. If the final language of the bill stayed the same as it made its way through both sides of Congress, it will say that “The CFTC SHALL set limits on ALL futures contracts.” The word “shall” is key here; it means that the CFTC not only has the power to act to curb the massive manipulation in the precious metals markets, but that they MUST ACT TO DO SO BY LAW. This means that JP Morgan and the rest of “Da Boyz” will be scrambling to unwind their short positions in the metals markets as clearly they are well above any limits that will be established. These banks have already begun the unwinding process of their massive short positions over the last couple of weeks. The methodology they have been employing has been to remove their bids, causing a brief downward turn in the market prices. (This is not selling activity!) When the market prices reach their desired target level, they activate their buying programs as an exit strategy for their short positions. This is known as “short covering”. The result of this activity is a decrease in the massive short sell positions that they hold and should result in upward pressure on prices. What does this mean for you? It means that every single dip should be bought. We’ve been saying that the manipulation in the precious metals markets might soon be coming to an end for months now, and that when it does, prices have the potential of skyrocketing. Over the next few weeks “Da Boyz” may be escalating this activity in order to deplete their massive short sell positions. The astute investor should be poised to take advantage of these intraday lows whenever they might occur as the long-term bull market for precious metals is becoming even more entrenched. 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. Ownership of physical gold and silver should no longer be considered just as a profit potential vehicle but should be considered as an essential portion of one’s asset portfolio as an insurance policy against the potential of a world-wide meltdown in fiat currencies, including the US dollar.

Trading Department – Precious Metals International, Ltd.

This is not a solicitation to purchase or sell.

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

The Week in Review – July 16th, 2010
Posted by Worldwide Precious Metals on Friday, July 16, 2010

As featured on: