Newsroom

The Week in Review – August 6th, 2010

August 6, 2010

In perhaps the first example that the Fed may become a political tool, rather than remain the technical body it has historically been, the US Senate killed the nomination of Peter Diamond to the Federal Reserve Board.

Canada posted its first negative jobs number for all of 2010 this week. In the US, employment fell for the second straight month. The loss of 131,000 in non-farm payrolls was much higher than analysts expected. Adding fuel to the fire, June’s figures were revised downward by 97,000 jobs and the weekly figures on new claims for unemployment benefits also spiked last week. The unemployment rate remained unchanged at 9.5% despite the additional job losses but given the fact that many have given up trying to find employment in the horrible labor market, and have therefore fallen out of the statistics, this is not a surprise.

Most retailers fell short on their July sales as consumers continue to cut back on their spending due to poor outlooks on employment and news that the recovery is beginning to stall. This is the fourth straight month of weak spending. If back to school shopping does not cause their sales to pick up, things are going to get even uglier.

In Greece, inflation hit a 13 year high of 5.5% in July after several tax hikes were enacted to try to raise cash for the embattled country. Rising costs might force Greek consumers that are already nervous over what’s taken place in their country over the last few months to cut back further on their spending. Higher costs may also impair the country’s competitiveness and make it even harder for Greece to dig out of the financial hole they are in.

In Russia, a drought and massive fires are playing havoc with wheat production. Russia has placed export curbs on wheat due to the problems, which will most likely force prices higher across the globe. Spiking wheat prices will lead to an increase in food costs for consumers who are already hoarding their cash adding one more reason for them to rein in spending.

The European Central Bank and the Bank of England both committed to continuing to hold their interest rates at record low levels this week.

30 year mortgage remain at record lows and the 15 year mortgage rates are now officially the lowest on record. Despite record low rates, the number of buyers who signed contracts to purchase homes hit the lowest level on records dating back to 2001. Banks are still refusing to lend the money that they have available, and the horrendous outlook on employment is keeping consumers out of the housing market.

Weak economic data in the US helped the euro rally to three month highs against the dollar this week.

Crude oil finally broke through $80 a barrel this week but was looking weaker after the jobs data was released on Friday. The worse than expected data raised concerns that the economic recovery was slowing further which may reduce the demand for energy.

Friday to Friday Close

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

Volatility should be expected to continue. If you took advantage of the price dips engineered by the likes of JP Morgan Chase and HSBC to add product to your portfolio, congratulations! The large banks are beginning the enormous task of trying to comply with the new Dodd-Frank financial reform law. Goldman Sachs will most likely be spinning off its proprietary trading unit into an independent hedge fund to comply with the new law. Other banks will most likely follow suit if Goldman proves it can be successful. The abysmal jobs numbers for July (which, if history can be a guide, will be revised next month to an even worse figure) may lead the already shaky consumer to further hoard cash, curbing spending even further on fears of their own employment. While news out of the Eurozone has been relatively quiet this week, the spiking inflation in Greece may be an early indicator of what is to come for the rest of the member countries as they all seek to raise taxes to rein in ballooning deficits. The Fed meets next week and many feel that they will resume their “Quantitative Easing” measures to try to get the recovery moving forward again. When the printing presses fire up and they start creating money out of thin air again, the dollar may take another pummeling. Goldman Sachs revised their growth expectations for the US economy for 2011 due to “heightened concerns of Congressional Resistance to do what is necessary in terms of stimulus”. Goldman also predicts the jobless rate will rise to 10% and stay there for the majority of 2011 and that inflation will increase as well in the coming months. As the dollar weakens and uncertainty continues in the stock markets, we may see a spike in demand for precious metals as investors look for ways to shelter their hard earned money from the effects of inflation. Price dips in this environment present perfect opportunities to add to or begin your precious metals portfolio. 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 6th, 2010
Posted by Worldwide Precious Metals on Friday, August 6, 2010

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