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The Week in Review – July 9th, 2010

July 9, 2010

It was another Yo-Yo week, shortened by the Fourth of July holiday in the US. The stock markets were up for the third straight day on Thursday but Daryl Guppy, CEO of Guppytraders.com urged caution. Guppy remarked on Monday that the Dow Jones Industrial Average is repeating a pattern that appeared just before markets fell during the Great Depression. Despite a boost in retail sales this month, MasterCard reported on Thursday that sales of luxury goods are down leading to speculation that even the wealthy may be starting to hoard cash in preparation for another downturn.

US Consumer credit took a nosedive in May and was also revised down significantly for April as well. The Federal Reserve said Thursday that outstanding credit to US consumers fell 9.15 billion, much larger that the projected $2 billion decrease. April’s reading was even further off: The original report was a rise in consumer credit of $1 billion, the newly revised April reading was instead a drop of $14.86 billion. This appears to be more proof that the “Credit Crunch” is far from over, and may actually even get worse now that “FinReg” has passed.

Initial claims for unemployment fell more than expected and continuing claims were the lowest they’ve been in seven months. The data may be completely inaccurate, however, due to the fact that many people have given up trying to find a job and they are no longer counted in the data. Continuing claims data is also skewed by the fact that Congress still has not moved to pass a law extending benefits for those who have been out of work longer than the standard benefits would cover, so they too are not counted in the figure.

The European Central Bank and the Bank of England both agreed to continue to keep rates at their exceptionally low levels again this week. Stubborn inflation measurements in Britain may mean that the Bank of England has no choice but to begin raising rates in the near future.

Thirty One percent of all home sales are foreclosures. In a normal market, only 1 to 2 % of sales is a foreclosure and the largest defaulters on mortgages has become the wealthy themselves. Many who have been losing money on their investment properties are simply walking away from them, apparently without a care that their actions are helping to push prices for neighboring homes even lower.

US wholesale inventories climbed higher in May, hitting their highest levels in 11 months. This is good news for economic growth, but it was offset by the first decline in wholesale sales. The sales decline was unexpected, and was the first such decline in over a year.

South Korea shocked the global economic community by raising rates on Friday. It seems that despite continuing problems in the Eurozone, which they believe may have an effect on their own economy, more immediate concerns about inflation are taking precedence.

Crude oil is still hanging on to that mid $70 a barrel range despite the ongoing saga in the Gulf of Mexico that should have helped to drive the price down. Positive inventory numbers and improving investor sentiment apparently helped keep the price up despite uncertainty about the future of oil drilling of the US Coast.

The Euro continued to gain ground on the dollar this week, breaking above $1.25 for the first time in many weeks.

Friday to Friday Close

	July. 2nd	July. 9th	Net Change
Gold	$1207.00	$1209.00	2.00 + 0.17%
Silver	$17.68	$18.05	0.37 + 2.09%
Platinum	$1495.00	$1530.00	35.00 + 2.34%
Palladium	$426.00	$455.00	29.00 + 6.81%

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

	Gold	Silver
Support	1180/1150/1125	17.50/17.00/16.50
Resistance	1215/1225/1250	18.20/18.50/19.00

	Platinum	Palladium
Support	1500/1480/1450	445/425/400
Resistance	1550/1600/1650	460/475/500

Volatility should be expected to continue. Damon Vickers, managing director of Nine Points Capital Partners said on Thursday that as the real estate market continues to flounder and credit continues to tighten investors in search of liquidity may trigger a selloff similar to the one that occurred in 2008. Quietly swept under the rug by the media was a massive gold swap that took place by the Bank for International Settlements. In its 2010 annual report the BIS said that “gold, which the bank held in connection with gold swap operations, under which the bank exchanges currencies for physical gold, stands at 8,160.1 million in special drawing rights, equivalent to 346 tonnes this year, up from nil in 2009.” The amount has jumped to 382 tons since the report was released. The Wall Street Journal had originally reported that the swap was with a central bank, but it was quietly corrected by the BIS, who said the swap was with “commercial banks”. Many analysts think that is simply a smokescreen and that one or more central banks brokered a deal with one or more commercial banks to arrange the swap (no “commercial bank” has 382 tons of gold on its books!). The idea behind these swaps is that one party trades the gold for foreign exchange currencies held by the other party, agreeing to unwind the transaction at an agreed upon price at a later date. Should the trade not be undone, the party that traded the currencies becomes the owner of the gold. In other words, to put it bluntly, GOLD IS BEING USED AS MONEY. The bigger question is this: What country or countries had to resort to trading their gold in order to build up foreign exchange currencies, and are they going to be able to return those currencies to the BIS at the end of the swap agreement? If not, we can expect a financial implosion in that country the likes of which we have not yet seen throughout the current “Sovereign Debt Crisis”. The astute investor would take advantage of any price dips in this volatile market to add to, or even begin, their precious metals portfolio. Precious metals are straining against the artificial restraints of a manipulated market and the ropes are starting to fray. When those ropes finally snap and the free market takes control once again, prices of precious metals could explode to the upside. 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, Precious Metals International, Ltd.

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

The Week in Review – July 9th, 2010
Posted by Worldwide Precious Metals on Friday, July 9, 2010

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