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The Week in Review – December 2nd, 2011
December 2, 2011
What an incredible week! Welcome to December, and it couldn’t have started on a more positive note for precious metals.
On Wednesday, The European Central Bank, US Federal Reserve, Bank of England and the central banks of Canada, Japan and Switzerland all took coordinated action to try to aid the Eurozone. The joint plan calls for reducing the cost of “liquidity swaps” which are temporary dollar loans that the central banks offer to other banks to half a percentage point. In a joint statement, the banks involved said “The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity.”
Also on Wednesday, China’s central bank cut their reserve requirement ratio for the first time in close to three years. The move appears designed to loosen the tight credit market in China and should free up capital for banks to lend to small firms in the country that are in need of operating capital.
Initial claims for unemployment moved back over the key 400,000 mark once again this week but the Jobs Report that came out Friday contradictorily showed improvement, with the official unemployment rate falling to 8.6%, the lowest since March of 2009. Many analysts seem to doubt the accuracy of Friday’s data and point out that the report showed the labor participation rate declining, meaning fewer people were actually searching for employment, and job growth which was only modest at best. Neil Dutta, US economist at Bank of America Merrill Lynch, told his clients “We would not be surprised to see the unemployment rate give back some of its decline in the coming month(s).”
Italian bond yields continued their inexorable climb this week, with borrowing costs reaching levels well above where Greece and Portugal were eventually forced to ask for bailouts. Christian Noyer, France’s central bank governor as well as a council member of the European Central Bank, said on Wednesday in Singapore “The situation in Europe and the world has significantly worsened over the past few weeks. Market stress has intensified. We are now looking at a true financial crisis – that is a broad-based disruption in financial markets.”
On Friday, South Korea’s central bank announced that it bought gold in November for the second time this year in order to diversify its foreign reserves. Lee Jung, an official at the bank’s reserve management group told reporters “We bought the gold as part of our diversification strategy and based on long-term investment considerations.” Hou Zinqiang, an analyst at Jinrui Futures in China, said “Emerging economies including Russia and China have been adding to their gold reserves, as the situation in the United States and Europe is not looking great. Growing appetite for gold from central banks will surely support gold prices to further rally in the next few years, and gold is gaining an increasingly prominent status on central banks’ books.”
Crude oil pushed its way back over $100 a barrel again this week due to unrest in the Middle East, easing in China and the almost continual news flood out of the Eurozone.
The euro reversed its decline against the dollar this week, driven higher by the coordinated Central Bank action announced on Wednesday. The Japanese yen was declining against the dollar as well but saw some reversal of that after the announcement and it appears that it will finish the week essentially having moved sideways against the dollar.
Friday to Friday Close
| November 25th | December 2nd | Net Change | |
|---|---|---|---|
| Gold | $1681.00 | $1747.00 | 66.00 + 3.93% |
| Silver | $31.82 | $32.60 | 0.78 + 2.45% |
| Platinum | $1530.00 | $1550.00 | 20.00 + 1.31% |
| Palladium | $569.00 | $642.00 | 73.00 + 12.83% |
| Dow Jones | 11231.78 | 12052.34* | 820.56 + 7.31% |
Month End to Month End Close
| October 31st | November 30th | Net Change | |
|---|---|---|---|
| Gold | $1724.00 | $1745.00 | 21.00 + 1.22% |
| Silver | $34.32 | $32.80 | (1.52) – 4.43% |
| Platinum | $1605.00 | $1560.00 | (45.00) – 2.80% |
| Palladium | $650.00 | $610.00 | (40.00) – 6.15% |
| Dow Jones | 11955.01 | 12045.68 | 90.67 + 0.76% |
Previous Year Comparisons
| December 3rd, 2010 | December 2nd, 2011 | Net Change | |
|---|---|---|---|
| Gold | $1406.00 | $1747.00 | 341.00 + 24.25% |
| Silver | $29.24 | $32.60 | 3.36 + 11.49% |
| Platinum | $1728.00 | $1550.00 | (178.00) – 10.30% |
| Palladium | $770.00 | $642.00 | (128.00) – 16.62% |
| Dow Jones | 11382.09 | 12053.34* | 670.25 + 5.89% |
* Current at time of writing
Here are your Short Term Support and Resistance Levels for the upcoming week.
| Gold | Silver | |
|---|---|---|
| Support | 1740/1700/1675 | 32.25/32.00/31.50 |
| Resistance | 1770/1800/1820 | 33.75/34.00/35.00 |
| Platinum | Palladium | |
|---|---|---|
| Support | 1540/1520/1500 | 640/625/600 |
| Resistance | 1575/1600/1625 | 660/680/700 |
Volatility should be expected to continue. Numerous news rumors are beginning to surface regarding Iran. Protestors reportedly seized the British Embassy in Iran in response to new sanctions imposed to curb their Nuclear program, and on Friday there were reported to be explosions at one of the nuclear facilities in that country. Further unrest in the Middle East may lead to additional disruptions in the oil market, pushing prices which have already been climbing back over $100 a barrel, even higher. The coordinated action announced by the central banks on Wednesday is just the latest in a slew of attempts to stave off the demise of the euro as a viable currency and is one of the most positive things for the precious metals market that we’ve seen in months. The spending and lending spree taking place in countries across the globe appears to be reaching critical mass and the ensuing meltdown should prove ugly for fiat currencies globally as governments print them into oblivion. The Eurozone crisis is proving to be the driving factor for markets as headline after headline rolls out of the debt laden region. Ted Butler, James Turk, John Embry and many other analysts for precious metals are calling for gold and silver both to breakout to the upside in a rapid and violent move as the Eurozone crisis continues. John Embry and James Turk both are predicting that silver may soon double from its present level and that many of those who have been standing on the sidelines waiting and watching will be taken off guard by the suddenness of the move. News events in these historic times are coming fast and furious so it is vital that you pay attention to the headlines, keeping the fundamentals that support precious metals in mind, and look for buying opportunities like the one JP Morgan and “Da Boyz” recently engineered again. John Embry, in an interview with King World News said this week “People are conditioned by their most recent experience and their most recent experience has been terrible. So naturally they are all bearish and can’t see the potential. That’s the opportunity. The person that recognizes that the fundamentals are there and they are just waiting for the trigger to unleash them is going to be the winner and the people that are losing their nerve here are going to be the losers.” If Mr. Embry, Mr. Turk, Mr. Butler and the other analysts are correct, now may be a perfect opportunity to acquire more precious metals for your portfolio. If they are correct in their assumptions and the move happens as fast and violently as they predict, there may be little time to react to make the most of such a move. These are historic times and the world seems to be teetering on the brink of financial meltdown once again, led by the massively debt-laden Eurozone. As central banks across the globe begin printing money into worthlessness, they only reinforce the fundamentals for owning physical precious metals. Remember that precious metals should be viewed as a long-term investment and that 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 – December 2nd, 2011
Posted by Worldwide Precious Metals on Friday, December 2, 2011
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