Newsroom

The Week in Review – July 23, 2010

July 23, 2010

Obama signed the Frank-Dodd bill into law this week. View the video of Commissioner Bart Chilton, from the Commodities and Futures Trading Commission discussing the new law by visiting the following link (the video is in Microsoft’s WMV format, if you have an Apple computer we recommend downloading Windows Media Player for Mac OS or getting the Flip4Mac plugin for QuickTime so that you can view the video): http://www.cftc.gov/files/oirm/video/cftc_023455.wmv.

Commissioner Chilton specifically states, in the video linked above, that the CFTC now has the legal power to establish and enforce position limits on all futures contracts, including gold and silver which are traded on the COMEX. The CFTC now has the power to criminally prosecute anyone found in violation of the law. This should include institutions like JP Morgan Chase and HSBC who are two of the parties responsible for the suppression of gold and silver prices through the use of their massive short sell positions. It should be anticipated that these institutions will increase their level of short covering in order to reduce their short sell positions prior to the establishment of contract limits by the CFTC.

To quote Ted Butler, who has long championed position limits of 1500 contracts in silver, “As to when legitimate position limits in COMEX silver should be enacted, the proper answer is yesterday. That should always be the regulatory response to a crime in progress.” The timing on when legitimate limits will be put in place, and what those limits will be, is now up to the CFTC and we concur with Mr. Butler that the CFTC should be pressed to enforce the new law now. Once the enforcement begins in earnest, JP Morgan and the rest of “Da Boyz” will have to cover their massive short positions in silver or their traders will face steep penalties, perhaps even jail time, under the new law.

On Wednesday, Bernanke began giving testimony on the state of the economy in front of the US Congress. His most memorable phrase from his testimony was that the outlook on the economy was “unusually uncertain”. The stock market subsequently nosedived on this confirmation that the economy is not as rosy as the administration would like for us all to believe. Bernanke continued his testimony on Thursday, stating that the Federal Reserve will try to push borrowing costs even lower if the job market does not improve soon.

Adding pertinence to Bernanke’s comments over employment, new claims for unemployment benefits climbed much higher than expected last week. The US Senate finally passed their vote to extend employment benefits for the long-term unemployed, which will most likely cause a spike in unemployment figures again for next week.

Rating agencies are concerned over legal liability under the new bank reform law. Ford motor company which was the only American auto company that did not require a bailout during the crisis, was due to issue an asset-backed debt offering. Ford has decided not to go ahead with the bond deal, which was backed by auto loans, since it cannot use credit ratings in its offering documents, a legal requirement for the sales to go through. Ford cannot use credit ratings in their offering because companies such as Fitch, Moody’s and Standard & Poor’s will no longer allow bond issuers to list their ratings in public sale documents since the new law makes it easier for investors to sue the rating agencies for assigning unrealistic ratings.

Home loan interest rates fell to fresh 30 year lows, even as sales of previously occupied homes dropped in June. The expectation is that sales will continue to drop, eventually leading to a 10 month supply of homes on the market and depressing housing prices even further.

The criteria for the European “stress tests” for banks leaked out early, much to the chagrin of the officials in charge of the tests. The tests assume no risk of sovereign default, leading many to say that the tests will not reflect the full extent of potential problems in Europe. The euro, which had already been falling against the dollar this week, fell sharply even before the results of the stress tests were published.

European Central Bank president Jean-Claude Trichet called for all industrial countries to cut public spending and raise taxes immediately in order to help boost the fragile recovery. This is directly opposite of the thinking in the US and UK. Both Bernanke and the Bank of England publicly discussed the possibility of further easing policies this week if the recovery continues to falter.

Crude oil approached $80 this week as strong earnings boosted the outlook on the economy. A tropical system appears to be headed into the Gulf of Mexico over the weekend, potentially affecting output for the oil companies in the area which may boost prices over the next week.

Friday to Friday Close

	July. 16th	July. 23rd	Net Change
Gold	$1190.00	$1189.00	(1.00) – 0.08%
Silver	$17.84	$18.14	0.30 + 1.68%
Platinum	$1516.00	$1545.00	29.00 + 1.91%
Palladium	$452.00	$467.00	15.00 + 3.32%

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

	Gold	Silver
Support	1175/1160/1150	17.75/17.50/17.20
Resistance	1200/1220/1225	18.30/18.50/18.75

	Platinum	Palladium
Support	1500/1480/1450	450/430/425
Resistance	1550/1600/1650	475/500/520

Volatility should be expected to continue, perhaps even increase. The new financial reforms law now requires the Commodities and Futures Trading Commission to set position limits on ALL futures contracts which means that JP Morgan Chase and the rest of “Da Boyz” will be out of business as far as their massive and manipulative shorting of the precious metals markets goes. Once the CFTC begins enforcing the new law, the precious metals market will be set free of the manipulation it has suffered under for years. This may mean a drastic increase in prices as uncertainty continues to plague economies worldwide. Earnings season is upon us and despite a wealth of better than expected earnings reports; the stock market continues to yo-yo up and down as uncertainty over the state of the global economic recovery continues to rattle investors. Unintended side-effects of the new financial reform law are already becoming apparent as evidenced by Ford pulling their bond deal because the ratings agencies would not give them ratings to use. If the only American auto company that did not take bailout money can’t get credit, we can expect that the average American will find it even harder to do so until the new law is understood completely, which may take years. 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. 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’ve been commenting on the issue of position limits for months and it now appears that the precious metals markets will soon be set free. Keep your eyes on the news. Precious metals appear poised to be the “safe haven” play for a rattled investor and in a free and un-manipulated market; prices may explode rapidly to the upside. Below you will find the e-mail addresses for members of the CFTC so that you can urge them to move quickly to set the appropriate position limits, (specifically 1500 contracts, as recommended by Ted Butler) immediately, and set the precious metals markets free from any further manipulation.

Trading Department – Precious Metals International, Ltd.

This is not a solicitation to purchase or sell.

The Week in Review – July 23, 2010
Posted by Worldwide Precious Metals on Friday, July 23, 2010