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The Week in Review – January 6th, 2012

January 6, 2012

Welcome to 2012, and what a fantastic start so far for silver and gold! The naysayers that were out in force talking the price of precious metals down as we ended 2011 are doing some serious backpedalling this week as the metals resumed their upward climb.

Dennis Gartman, who said last week on Thursday “if [gold] prices come down another $15 overnight, I’m going to start buying again”, said on Thursday of this week on CNBC that he missed an opportunity to get back in. In his daily investment letter on Thursday, Mr. Gartman said “The bear run that began in August has now officially ended, for the string of lower lows and lower highs is over. This does not help us in hoping for/expecting/indeed demanding some weakness into which to buy, but it does give us ’permission’ to become officially bullish once again.”

Unemployment was lowered to 8.5% last month and job creation was better than expected. The fact that the statistic showing those who had “given up”, employable individuals that have chosen to leave the workforce entirely, closed out 2011 at a record high shows that that unemployment figure may not be accurate. The increase in job growth may lead these individuals to re-enter the search for employment again, and the higher participation rate would drive that figure higher once again. We also now enter the period of time when temporary employees that were hired for holiday help begin searching for permanent work again. Next week, or perhaps the following, should see a more accurate job market picture.

In Europe, talks of banning Iranian oil imports across the EU may have deeper consequences than anyone is predicting. Greece currently imports roughly 30 percent of its domestic oil from Iran according to the International Energy Agency. Paul Stevens, economist and emeritus professor at Dundee University in Scotland said this week in an interview with CNBC “Let’s assume the European Union is stupid enough to go along with the US in imposing sanctions on Iran. That would only mean 250,000 barrels of heavy sour oil not coming into the EU. But the impact that would have on countries like Italy and Greece would be enormous, and the Greeks are not going to slit their own throats for the sake of an EU sanction when Iran is the only country willing to offer them oil on favorable terms. It would utterly destroy the Greek economy.”

The average rate on a 30 year fixed mortgage feel to 3.91 percent this week according to troubled mortgage giant Freddie Mac. The record low rates are doing little to aid the embattled housing industry however. Many either are unable to take advantage of the rates due to tight lending conditions that continue to force contract cancellations or have already taken advantage of lower rates and refinanced in 2011 and see no need to go through the process again.

Oil fluctuated back and forth this week, trading on headlines, but maintained its level above $100 a barrel. Escalating tensions between Iran and just about every other country on the planet may act to push oil prices ever higher as the EU joined the growing list of countries that are considering banning the import of Iranian oil.

Across Asia, China, Japan and South Korea all announced that they were seeking ways to lessen dependence on Iranian oil. US Treasury Secretary Timothy Geithner will be traveling to both China and Japan next week to discuss US sanctions on Iran, as well as the state of the global economy.

The euro continued its downward trend against the dollar this week, pushing lower as talk of a recession across the Eurozone ramped up. The yen, which appears to have gone completely off the news radar, pushed to its highest levels since November against the dollar.

Friday to Friday 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. This week, we once again pass along some quotes from Ted Butler, printed in Ed Steer’s Gold & Silver Daily. Mr. Butler writes “The big commercial shorts had a near death experience when the price approached $50 in April. They were at the end of their rope and needed to do something in a hurry. That’s why they rigged prices lower; so they could buy and save themselves. These well-connected commercials knew, perhaps for the very first time, just how tight the silver market had become and how close we were to a profound physical shortage. The key is that the silver shortage wasn’t caused by excessive speculative buying or a bubble or a mania. The extreme tightness and near shortage in silver was a result of the gradual and cumulative impact of normal investment buying over the past five years. There is nothing to suggest that the long term and steady silver investment buying has ended.” Mr. Butler continued, saying “Because there was no bubble or mania in silver, there was no bubble to burst. The orchestrated takedowns of the price by the big commercial interests were simply so that these commercials could buy and rid themselves of silver short positions. That’s done now. That means that the silver market is now in the best possible shape.” Mr. Butler concluded with “The major pressure of selling has passed… and the way seems clear for higher prices. By the time the next chapter in the silver story plays out, $50 could look cheap.” James Turk, in an interview with King World News this week said, regarding a silver chart showing the price of silver over the last two years, “Because it is a descending flag pattern, the breakout pattern has now moved down to $37.50, but $35 is the more important resistance level. Once these two levels are taken out, that three month move to $70 begins. So as I see it, just keep accumulating physical silver here. The fundamentals for silver continue to remain very bullish and only time will tell if silver is the next Apple [a reference to Apple’s stock performance displayed on a long term chart. Apple’s stock price increased over 70 times over the years spanning 2002 to present, despite 5 major corrections to the downside]. I continue to expect that silver will go much higher and reach my $400 per ounce forecast…” Regarding gold, Mr. Turk said “Over here in Europe, the euro and the worsening European bank crisis are inevitably leading many people to the gold market as a safe haven. Consequently, I think it’s safe to assume that the low for gold is in place. In fact, Eric, we’ve probably seen, this week, the low price in gold for the year. In other words, onwards and upwards from here with a price well over $2,000 within sight.” Wise investors ignored the hype and fear that was being thrown around as 2011 came to a close and viewed the manipulations and maneuverings that took place in the precious metals market as buying opportunities. If Mr. Butler, Mr. Turk, and even Mr. Gartman are correct, the decade long bull market in gold and silver is expected to continue in a spectacular fashion in 2012. If prices explode the way Mr. Butler and Mr. Turk expect, current prices, and even last April’s high prices may seem like bargains when viewed in hindsight. 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 – January 6th, 2012
Posted by Worldwide Precious Metals on Friday, January 6, 2012

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