The Week in Review – April 13th, 2012
April 13, 2012
This week started with a continuation of the DJIA’s worst losing streak of the year following last Friday’s less than stellar March employment data report.
Initial claims for unemployment surged higher last week hitting a two month high of 380,000. The prior week’s data was also revised higher by 10,000 as we suspected might be the case. Ryan Sweet, a senior economist at Moody’s Analytics, said “The increase [in claims] caught our attention, but the next few weeks will be very telling. If claims continue to tick higher then it will be a signal that the sword over the jobs market is real.”
The University of Michigan/Thomson Reuters initial US consumer sentiment index reading for April showed an unexpected decline apparently due to continued escalation of gasoline prices. Geopolitical concerns such as continuing tensions between Iran and the rest of the world, and an ongoing economic slowdown in China may also have added to consumer fears as well.
In Europe, Spain continues to have central bankers around the world afraid that it is becoming the next great threat to the global financial system. Spain’s stock markets and shares of its largest banks continued to decline this week. The thing that has these central bankers so concerned is the fact that Spain’s three largest banks have combined assets totaling roughly $2.7 trillion while the country’s GDP is only around $1.4 trillion. This means Spain’s three largest banks combined are nearly twice the size of Spain’s entire economy. Talk about too big to fail! The Eurozone couldn’t possibly print up enough money fast enough to save these banks if they begin to go down.
The International Monetary Fund released its Global Finance Stability Report this week in which it said “Safe-asset scarcity could lead to more short-term volatility jumps, herding behavior, and runs on sovereign debt. In the future, there will be rising demand for safe assets, but fewer of them will be available, increasing the price for safety in global markets.” According to the Financial Times, “The Fund identified $74.4 trillion of potentially safe assets today, including gold, investment-grade government and corporate debt, and covered bonds.” The FT continued, saying “But it [the IMF] warned that 16 percent of the potential safe government debt supply to 2016 could disappear if governments continued to borrow at current rates and hence made their debt more risky.”
According to RealtyTrac, first time foreclosure notices in the US rose 7 percent in March, the third month in a row foreclosure notices have increased. Despite the increase in first time notices, overall foreclosure activity appears to have fallen despite a backlog of foreclosures that remain in the wings of most banks as a result of last year’s “robo-signing” scandal.
In Asia, China’s economic growth appears to have slipped to its lowest level in nearly three years in the first quarter. An increase in industrial production and retail sales however has re-opened the debate on whether China’s economy will experience a “hard landing”, an abrupt and sudden economic slowdown, or a “soft landing” which would be a continuation of the gradual slowdown that has been ongoing for some time now.
Crude oil maintained its grip on the lower $100 a barrel range again this week apparently held there by an unexpected increase in crude supplies and a report released by the International Energy Agency that contained a projected demand that was weaker than analysts expected.
The euro slowly climbed higher against the dollar this week. The Japanese yen also moved sharply higher against the dollar this week.
Friday to Friday Close
|April 5th||April 13th||Net Change|
|Gold||$1628.00||$1659.00||31.00 + 1.90%|
|Silver||$31.75||$31.38||(0.37) – 1.17%|
|Platinum||$1595.00||$1580.00||(15.00) – 0.94%|
|Palladium||$643.00||$642.00||(1.00) – 0.16%|
|Dow Jones||13064.14||12849.59*||(214.55) – 1.64%|
Previous year Comparisons
|April 15th, 2011||April 13th, 2012||Net Change|
|Gold||$1485.00||$1659.00||174.00 + 11.72%|
|Silver||$42.60||$31.38||(11.22) – 26.34%|
|Platinum||$1795.00||$1580.00||(215.00) – 11.98%|
|Palladium||$768.00||$642.00||(126.00) – 16.41%|
|Dow Jones||12341.83||12849.59*||507.76 + 4.11%|
* Current at time of writing
Here are your Short Term Support and Resistance Levels for the upcoming week.
Volatility should be expected to continue and perhaps increase further. The Federal Reserve made a huge show this week of parading officials out on the airwaves and adding to the confusion about whether further stimulus was, or was not, still on the table. The media is choosing to spin it that such a flurry of public statements must surely mean that further stimulus measures are less likely. Everyone else is taking a “wait and see” approach. There are simply entirely too many unknown variables in the world these days to make assumptions based on the public statements of a few individuals in a single country. The simple fact of the matter is that nothing operates in a vacuum. The failure of just 3 Spanish banks could wreak financial Armageddon across the globe in this interconnected world, and such an event would surely prompt the Federal Reserve to engage in more Quantitative Easing, “Operation Twists”, “Sterilized” QE or whatever other ridiculous moniker they want to hang on the monetary printing spree that would ensue. The “paper shorts”, as James Turk calls “Da Boyz”, appear to be doing their best to scare people out of the market, but that appears to be getting harder and harder for them to do given that every time they attempt it, the support holds. As James Turk put it in an interview with King World News this week: “It has been a rough couple of weeks, Eric. That is not unusual over a holiday period, like the 4-day weekend here in Europe. Liquidity usually dries up during these periods, so short-term volatility can often be the result. And we have seen that in both the precious metals, with gold again testing support at $1650, silver is testing support under $32.” Mr. Turk continued in the interview, saying “This short-term volatility is particularly obvious in silver. The intraday charts the past few days have some large swings, which result from the big shorts pushing the paper market around to see if they can dislodge some longs. This is particularly to see if they can pick up some physical metal from the weak hands. The paper shorts never go on holiday. They have too much at stake, and they use periods of limited liquidity to hit the market hard to try to shake people out. The shorts are now being forced to retreat, and I have been waiting for another catalyst that will send both precious metals higher, Eric.” Mr. Turk finished his interview with a chilling observation: “Governments and the people who have come to rely on them do not realize that the socialism game being played for so many decades is ending. Economies cannot exist when the number of tax eaters are greater than the number of tax payers, but that has been the case in Europe for a while now. Some 52% of France’s GDP, as one example, comes from government spending. That is not sustainable, and with the private sector shrinking pretty much throughout the Eurozone, the growing burden being placed on it is making matters even worse. We know from history that socialism brings about the end of empires. It also destroys a nation’s currency. This is why it is so important for KWN readers around the world to protect themselves with physical gold and silver.” The panic that the paper shorts are failing to produce may be presenting wise investors with the perfect buying opportunity to acquire more metals for their portfolios. 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 overextend your ability to maintain ownership of your precious metals over the long term.
Trading Department – Precious Metals International, Ltd.
© 2013, Precious Metals International Ltd.
The Week in Review – April 13th, 2012
Posted by Worldwide Precious Metals on Friday, April 13, 2012
Fill Prices may vary based on actual time orders are placed and confirmed. All orders are Final and Subject to Terms and Conditions of the Customer's Account Agreement with Precious Metals International, Ltd. All Fabricated Products for Home Delivery are quoted, basis specific product, quantity and delivery destination at Time Orders are placed and confirmed. Retail Dealer Prices may vary.