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The Week in Review – June 1st, 2012
June 1, 2012
It seems the old Stock Market adage “Sell in May and Go Away” continues to hold true. Stocks had their worst month in two years in May, and today’s jobs data appears set to start the month of June off with a massive losing day in the stock market as well. In stark contradiction to the global stock “downdraft”, precious metals all closed higher for the week.
The jobs data for May was released today by the Bureau of Labor Statistics, and the numbers may have some economists looking for work themselves today. Economist estimates were for a creation of 158,000 new jobs and the actual number was a mere 69,000, a miss by well over 50% for the esteemed economists! The unemployment rate rose for the first time in close to a year as well, climbing back to 8.2%. Todd Schoenberger, managing principal at The BlackBay Group in New York told CNBC “It’s painfully obvious the economic recovery in the U.S. isn’t just slowing down, it’s pulling up the emergency brake.” The BLS also revised April’s jobs data downwards, dropping from 115,000 down to 77,000, a drop of 38,000 which may indicate this month’s figures might be overinflated as well.
Unemployment across the Eurozone hit 11 percent, its highest level since 1995, according to Eurostat which is the EU’s statistics office. The low average number for the Eurozone as a whole belies the larger issues in countries such as Spain, where unemployment has hit a staggering 24.3 %, and Greece, also well above 20% unemployment (as of February, current figures in yet). France and Italy both saw a rise to 10.2 % unemployment in April as well.
Pressure is mounting once again for some form of intervention in the Eurozone, either in the form of additional QE or another Long Term Refinancing Operation (LTRO). Mario Draghi, the European Central Bank president, told members of the European parliament Thursday that the ECB is reaching the limits of its powers and that it is up to politicians now to move forward. Mr. Draghi said the structure of the EU has become “unsustainable unless further steps are undertaken.” Mr. Draghi also left political leaders with this question and an accompanying, and blunt, answer: “Can the ECB fill the vacuum left by lack of euro area governance? The answer is no.”
In Greece, deposits continue to flow out of banks as fear increases that the embattled country is edging closer and closer to having to exit the European Union. Elections in Greece are set to be held again on June 17th and the most recent polls do not show any clear leader in the upcoming contest. Should the radical left-wing SYRIZA party gain victory, the party’s outspoken leader Alexis Tsipras has said the previous bailout agreement Greece struck with the “troika” would be null and void. Mr. Tsipras said the agreement would be replaced with, “a national recovery plan for economic and social growth and productive reconstruction”. Any move to annul the previous bailout agreement would almost assuredly throw the debt-laden country into chaos as its funding disappeared.
In China, two different surveys of manufacturing activity showed that the economy there continued its slowdown in May. Federic Neumann, co-head of Asian Economics Research at HSBC told CNBC Asia “It is very clear from these numbers that more needs to be done and micro-surgery might no longer do it because the patient is in critical condition.”
Crude oil inventories rose for the 10th week in a row and the price dropped into the lower $80 a barrel range on concerns over the continued slowdown in China, poor economic data out of the US, and the continuing crisis in Europe.
The euro continued its slide against the dollar, once again renewing speculations that the euro was headed for parity with the US dollar. The Japanese yen climbed sharply higher against the dollar this week.
Friday to Friday Close
| May 25th | June 1st | Net Change | |
|---|---|---|---|
| Gold | $1571.20 | $1620.00 | 48.80 + 3.11% |
| Silver | $28.39 | $28.45 | 0.06 + 0.21% |
| Platinum | $1426.50 | $1445.00 | 18.50 + 1.30% |
| Palladium | $590.00 | $612.00 | 22.00 + 3.73% |
| Dow Jones | 12454.83 | 12118.57* | (327.93) – 2.63% |
Month End to Month End Close
| April 30th | May 31st | Net Change | |
|---|---|---|---|
| Gold | $1664.00 | $1563.00 | (101.00) – 6.07% |
| Silver | $30.95 | $27.80 | (3.15) – 10.18% |
| Platinum | $1570.00 | $1415.00 | (155.00) – 9.87% |
| Palladium | $682.00 | $612.00 | (70.00) – 10.26% |
| Dow Jones | 13213.63 | 12393.45 | (820.18) – 6.21% |
Previous year Comparisons
| June 3rd, 2011 | June 1st, 2012 | Net Change | |
|---|---|---|---|
| Gold | $1542.00 | $1620.00 | 78.00 + 5.06% |
| Silver | $36.20 | $28.45 | (7.75) – 21.41% |
| Platinum | $1825.00 | $1445.00 | (380.00) – 20.82% |
| Palladium | $783.00 | $612.00 | (171.00) – 21.84% |
| Dow Jones | 12151.26 | 12118.57* | (32.69) – 0.27% |
* Current at time of writing
Here are your Short Term Support and Resistance Levels for the upcoming week.
| Gold | Silver | |
|---|---|---|
| Support | 1600/1550/1530 | 28.20/27.80/27.20 |
| Resistance | 1640/1675/1700 | 28.70/29.00/29.80 |
| Platinum | Palladium | |
|---|---|---|
| Support | 1420/1400/1380 | 600/580/550 |
| Resistance | 1450/1475/1500 | 620/640/675 |
Volatility should be expected to continue and perhaps increase further. The May jobs report in the US has once again reignited speculation that the Federal Reserve may need to engage in further easing measures. Combine the poor US economic data with the poor China economic data, and a crisis in Europe that seems on the verge of spiraling out of control and exploding across the globe and you have a situation that seems like almost a “perfect storm”, and one that may very well blow precious metals prices to new highs that make last year’s record moves seem miniscule by comparison. Robert Zoellick, President of the World Bank, in an editorial in the Financial Times on Thursday compared the summer of 2012 to the days of 2008, just prior to Lehman Brother’s collapse. Mr. Zoellick said “The European Central Bank, like the U.S. Federal Reserve in 2008, has sought to reassure markets by providing generous liquidity, but collateral quality is declining as the better pickings on bank balance sheets are used up.” Discussing the possibility of a Greek exit from the Eurozone, Mr. Zoellick said “If Greece leaves the Eurozone, the contagion is impossible to predict, just as Lehman had unexpected consequences.” In what can only be considered a stark warning to bickering Eurozone politicians, Mr. Zoellick said “A Greek exit would trigger a hit to confidence in other sovereign euro assets. Euro zone leaders need to be ready. There will not be time for meetings of finance ministers to discuss the outlook and debate the politics of incrementalism. In panicked markets, investors flee to safe assets, sparking other flames.” Money is literally fleeing both Greece and Spain as investors and depositors increasingly look for safer stores for their hard earned cash. This week saw the dollar index moving higher, the yen moving higher and the 30-year and 10-year bonds hitting all-time highs. One other asset was moving higher along with those just mentioned…Gold. As Dan Norcini put it in his interview with King World News on Thursday, “So there was a steady rush of buying in the safe haven markets. The surprise for many was the action in gold today. Gold came off the lows and rocketed higher. This took place when the dollar was moving higher, along with the yen and bonds. That tells you gold is functioning as a safe haven.” James Turk, one of our favorite industry analysts, had this to say in his King World News interview on Thursday: “The global financial situation is really starting to spin out of control, Eric. It won’t be long now before the Federal Reserve, ECB, Bank of Japan and Bank of England start more QE in an attempt to keep global stock markets from imploding and causing another Lehman Brothers collapse.” As the fear of a major event in the Eurozone continues to climb across the globe, it appears that precious metals have found their footing again. If this is the start of the massive upside move that James Turk has been predicting then now is the time to be vigilant and search for buying opportunities. A massive panic event, if it occurs, could send precious metals prices exploding to the upside so fast it might well be dizzying. June is setting up to be a month full of news with a Fed meeting, Greek elections, and who knows what out of Spain and the rest of the Eurozone. Pay attention to the news each week, especially on the weekends as Europe and Asia open, and make sure you are prepared to act swiftly and decisively so that you don’t miss any other buying opportunities. 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.
www.wwpmc.com
The Week in Review – June 1st, 2012
Posted by Worldwide Precious Metals on Friday, June 1, 2012
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