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The Week in Review – July 20th, 2010

July 30, 2010

The precious metals markets appear to have been the victim of another assault by “Da Boyz” this week. Options expiry time rolled around again, and the big boys took the opportunity to engineer favorable conditions for them to continue covering their massive short positions.

The next battle to come up for Congress has been set: The expiration of the Bush tax cuts. General consensus is that letting those tax cuts expire, which would be the equivalent of raising taxes, would add additional weight to an already dragging recovery. James Bullard, president of the Federal Reserve Bank of St. Louis, had this to say “Increasing taxes while you’re trying to get the economy to recover is not a good plan.” Deutsche Bank analysts said in a research note earlier this week that letting the tax cuts expire would “halt the economic recovery by 2011.”

US consumer sentiment dropped to its lowest level in 9 months in July. Most view this as an indication that consumer spending for the coming months will be extremely weak. A Reuters-Ipsos poll this week showed that 46% view Obama’s handling of the economy and jobs as unsatisfactory.

In Greece, where the sovereign debt crisis in Europe kicked off, summer holiday season has begun. In honor of this, striking truck drivers cut off fuel and food supplies, picketing seamen scared off cruise liners and public sector unions began their sixth strike of the year. While the country is, so far, on track with the austerity measures which it was forced to undertake in order to qualify for the emergency bailout loan that prevented a default on Greek sovereign debt, concerns continue to run high that things may still collapse in the embattled country.

Spain’s unemployment rate hit a 13 year high of 20.09 percent in the second quarter. Several of Spain’s banks also failed the “stress test”, raising concerns that the country may be the next in line for a Greek style bailout. Unemployment across the Eurozone as a whole continues to be stuck at 10 percent.

The International Monetary Fund said on Friday that some smaller US Banks that have heavy exposure to commercial real estate may need to raise more capital. This could lead to further tightening of credit by the banks that typically fund a struggling small business sector. Coinciding with the IMF’s statements, Republicans in the US Senate blocked a $30 billion plan to help community banks boost lending to small businesses. The Democrats refused to allow Republicans to amend yet another bill that would increase spending without cutting costs in other areas.

30 year mortgage rates hit record lows for the sixth straight week in a row, but many are not able to take advantage of it since understaffed lenders who are overwhelmed by foreclosures are keeping rates higher to try to keep their work load manageable.

The euro rose against the dollar this week apparently on elation over the results of the “stress test” results on Europe’s banks. The glow from the overblown and overrated stress tests in the Eurozone may soon fade, however, as higher taxes and public spending cuts across the board begin to take effect and start dragging on the struggling economies of the member countries.

Crude oil continued to trade around the $77 a barrel range this week.

Friday to Friday Close

Month End to Month End Close

Year to Date Close

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

Volatility should be expected to continue. The recent dip in prices (brought about once again by JP Morgan Chase and the rest of “Da Boyz”) is presenting a perfect opportunity for the astute investor to add precious metals to their portfolio. The underlying factors that have been driving precious metals prices higher have not changed: consumer sentiment has been plummeting, the temporary high in the Eurozone brought about by the bank “stress tests” there is beginning to wear off, and high unemployment remains a problem across the globe. Despite earnings reports that have come in better than expected for most companies, corporate guidance for the second half of the year is abysmal. Inflation is beginning to creep higher in Europe and increasing tax rates may soon drag a fledgling recovery back down both in Europe and the US. The CFTC is working towards establishing position limits in the precious metals markets to put a stop to the rampant manipulation that large institutions like JP Morgan Chase and HSBC have been able to engineer. We have confirmation directly from the CFTC that they will begin taking public comments and will establish those position limits within 180 days. Taking advantage of price dips as “Da Boyz” continue to unwind and cover their short positions in advance of the CFTC establishing those position limits may be the best way to diversify your portfolio by adding precious metals to it before the prices skyrocket higher in a market that will finally be free to trade as it should. 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 – July 20th, 2010
Posted by Worldwide Precious Metals on Friday, July 30, 2010

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