Newsroom

The Week in Review – August 13th, 2010

August 13, 2010

What a week! The Federal Reserve roiled markets this week by announcing they were going to re-start their Quantitative Easing program saying “the pace of economic recovery is likely to be more modest in the near term than had been anticipated.” So once again the Fed is going to fire up the printing presses and generate money out of thin air. This does not bode well for the long term outlook on the US dollar.

Goldman Sachs predicted gold would go to $1300.00 within 6 months and on Friday raised their forecast on the chance of a double-dip recession occurring to 25 to 30%. David Rosenberg, a noted economist, said on Friday that the consumers’ focus on shedding debt rather than spending will prevent the economy from growing and will, in fact, bring the recovery to a halt.

New claims for unemployment “unexpectedly” rose to its highest level in almost 6 months last week. This news, coupled with the Fed’s downgrade of the state of the economy helped push the stock market lower this week. The International Labor Organization said on Thursday that youth unemployment around the world has now hit a record high and that employment for the 15 to 24 year old range will most likely lag behind the recovery of the job market for adults.

The Commerce Department reported that inventories held by businesses rose for the sixth straight month in June. Sales of that inventory however, fell for the second straight month leading many to forecast even weaker spending for the second half of the year. The Federal Reserve Bank of Philadelphia’s survey of 36 professional forecasters sees the economy growing at an annual rate of 2.3 percent this quarter; down from the previous estimate of 3.3 percent, further reinforcing the view that the consumer is once again hoarding their cash.

The Eurozone gross domestic product grew at its fastest pace in more than three years in the second quarter. The growth was aided mainly by an extremely strong performance by Germany and France. Greece continued to drag on the 16 nation euro zone GDP, contracting by 1.5 percent in the reporting period. Impending austerity measures and higher tax rates throughout the 16 nation zone continue to darken the outlook on consumer spending however, which may lead to another slowdown of the recovery in Europe.

The drought continues in Russia, crippling their agricultural production and floods in Pakistan have destroyed almost $1 billion in crops. The USDA cut its forecast for global wheat output by 2.3 percent but was quick to point out that there would be no shortage of food grains. What this means however, is that wheat prices are going to climb higher, leading to a spike in food costs for consumers which will add just one more pressure point causing them to cut back spending in other areas.

The euro dropped against the dollar this week but the yen climbed higher. Comments by the Fed on Wednesday, while triggering a decline in the stock market, seem to have led to a short term pop in the dollar as investors bailed out of risky trades.

Mortgage rates set another record low for the eighth week in a row, but that does not appear to have helped the housing market at all. Banks took over homes at the second highest rate ever last month as they worked through their backlog of delinquent loans. Growing rates of delinquency, which the White House acknowledged were worse than previously thought, may soon lead to even higher foreclosure rates.

Crude oil dropped back into the mid-$70 range again this week despite inventory numbers that should have helped drive prices higher.

Friday to Friday Close

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

Volatility should be expected to continue. The dimming outlook on the pace of economic recovery, confirmed on Wednesday by the Fed, is leading to uncertainties once again in the stock markets. Analysts and investing firms, late to the party as usual, are now advising their clients to buy gold. The wise investor has already been buying precious metals, taking advantage of price dips to further diversify their portfolios in order to protect themselves from just such times of uncertainty. Growth in both the US and China is slowing and concern over a slowdown in the two leading world economies is beginning to reverberate across the globe. A slowdown in the economies of China and the US will most likely mean a slowdown in exports for other countries, which means a contraction in their own economies. The fact that the Fed has once again ramped up their Quantitative Easing program will most likely lead to further devaluation of the US dollar and if other nations follow suit once again, fiat currencies across the world may simply collapse in the aftermath. The astute investor would be accumulating precious metals on any price dips, even at current levels, prior to an upward explosion in prices brought about by continuing economic weakness across the globe and the devaluation of fiat currencies as governments futilely print money to try to stimulate their flagging economies. Governments around the world don’t seem to get it: It doesn’t matter how much money they print, it’s all going to the banks and the banks aren’t lending it out. Giving the banks more money does nothing to create jobs or get the consumer spending again and if the consumers don’t spend, the economy can’t grow. 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 – August 13th, 2010
Posted by Worldwide Precious Metals on Friday, August 13, 2010

• Home
• About Us
• Info Request
• Open An Account
• Bullion
• Newsroom
• Testimonials
• Contact Us
• Client Login
• Sitemap