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The Month in Review – January 31st, 2012

January 31, 2012

We are one month into the New Year, and what a month it has been! For those who purchased additional product during the final manipulative events of 2011, congratulations are in order! For those who continue to stand on the sidelines waiting for “a good time” to get back into the market, all you have to do is look back at price movement since December 30th. Doing that might lead the hesitant investor to say “wow…it appears that every day since December 30th was a good time to get back into this market.”

In our December 23, 2011 memo, we quoted Hinde Capital’s “HindeSight” report in which they said that all indications were that gold was beginning to bottom around the then current price level (~$1,600). We reiterated that Ted Butler, James Turk, et al. were of the opinion that the price manipulation was coming to a close and that 2012 would kick off with higher prices. Needless to say, they were incredibly accurate in their projections.

In our December 30, 2011 memo, we again stated that we believed we were seeing the greatest buying opportunity for all of 2011. Closing prices for that day appear in our Month End to Month End Close table in this memo. We quoted Ted Butler in that same memo as saying that “I know that this has been a trying time for silver investors, but it’s important to both understand what has happened…and to look ahead. The intentional price smash has created a powerful set up for the next silver rally.” Again, needless to say, silver has rallied and has outperformed gold this month.

January began just as Mr. Butler, Mr. Turk, Jim Rickards, and all of our other favorite analysts projected. Precious metals prices began rising as January opened, obliterating the artificially induced and temporary price dips we saw in the final weeks of December.

The US Federal Reserve announced this month that interest rates were now going to remain “exceptionally low” through late 2014 instead of 2013 as previously announced. The dollar subsequently got crushed and gold shot higher as a result. Expectations are that QE3, or QE to infinity, as some have called it, is just around the corner. The dollar should be crushed again as the Fed fires up the presses.

Europe’s situation remains unresolved. Greece is still in talks with its private bond holders to determine how big a “haircut” they will take. Portugal is apparently lining up to be the next country to ask for a second bailout (following in Greece’s footsteps). The other debt laden members of the Eurozone must surely be watching all of this with an eye towards finding a way out of their own crushing debt situations. Fitch downgraded several Eurozone countries this week, including Italy and Spain.

Oil continues to hover close to the $100 a barrel mark, helped by the uncertainty surrounding the state of the Iranian sanctions, particularly China, India and Europe’s implementation of those sanctions.

The euro is finishing the month up higher against the dollar, driven there by rumors that a debt solution in Greece is close to completion. The Fed’s announcement that interest rates would remain “exceptionally low” for the next three years also acted to crush the dollar against other currencies.

Friday to Tuesday Close

Month End to Month End Close

Previous Year Comparisons

* Current at time of writing

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

Volatility should be expected to continue. Gold has gained over 10% so far this month and silver has more than doubled that performance. The fresh highs that analysts have been predicting would occur in 2012 may now be setting up to happen much earlier in the year than they expected. Scott Minerd, of Guggenheim Partners, said on CNBC this afternoon that he expects silver to hit $50 and gold to reach $3,000. James Turk, whom we’ve quoted so often due to the accuracy of his views of the precious metals market, said in an interview with King World News yesterday “The important point to keep in mind is while silver may look high compared to where it started the month, to me silver looks cheap compared to its upside potential over the next few months. So don’t wait for a big pullback to buy. If today is the day where you purchase silver each month, go ahead and make the buy. Don’t try to time the market.” Mr. Turk continued, saying “once silver hurdles above $35, I expect to see $68-$70 in 2-to-3 months.” Mr. Turk further continued in his discussion of silver, saying “There is, of course, no guarantee that silver will successfully hurdle $35 on its first attempt, but we need to get ready just in case it does. By ‘get ready,’ I mean we have to prepare ourselves mentally – to eliminate the emotion and watch what silver is telling us. This can be very hard to do, but it is essential. Otherwise you will miss the big moves, and it is riding these big moves to the fullest extent possible, from start to finish, where the big money is made.” Mr. Turk went on to discuss gold in the interview, saying “Regarding gold, I don’t think people realize that gold could explode from current levels. I think the potential for explosion is there and what you are going to see is not only silver on the move, but you will also see gold smash through the $2,000 level.” This month has proven out the projections of analysts such as James Turk and Ted Butler and their assertion that the fundamentals for owning gold and silver remain strong. With Greece about ready to implode, and the jobless rate across the Eurozone at its highest level since the creation of the euro, things continue to look bleak for European economies. Savers in the United States have just been informed that they will face three more years of interest rates that are below expected inflation rates, effectively meaning they can sit back and watch their savings vanish, courtesy of the US Federal Reserve. If anything, the fundamentals for owning precious metals have become even stronger over the 31 short days we’ve been in the New Year, and if analyst predictions are correct, the fundamentals may become even stronger as 2012 wears on. If you exited this market and have been sitting on the sidelines since the last manipulation event in late December, you have been missing what may be your best opportunity to get back into ownership of precious metals before global demand and financial events set off a chain reaction that may send prices higher than anyone has ever seen. Approach this market smartly and do not overextend your ability to maintain ownership of your product in such volatile times as these. According to analysts, all indications are that this market is setting up for a huge explosion to the upside. If they are correct, the time to act is before that upside explosion happens. 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 Month in Review – January 31st, 2012
Posted by Worldwide Precious Metals on Tuesday, January 31, 2012

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