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The Week in Review – November 18th, 2011
November 18, 2011
JP Morgan et al appeared to be at work again this week, using Thursday’s market activity as cover to hammer the prices of precious metals down once again, creating what may be a perfect buying opportunity.
On Friday, it appeared that the “super committee”, which has until midnight on Wednesday to come up with a way to find $1.2 trillion in savings over the next 10 years, was on the brink of collapse. Democrats and Republicans in the committee seem to be unable to agree on the specifics of tax increases and cuts to benefits. Should the “super committee” fail to reach a deal, automatic spending cuts which would be split evenly between military and domestic programs would kick in beginning in 2013. Once again it appears the US Congress is taking things right down to the wire and the voting public appears to be growing weary of it. 2012 should shape up to be an interesting election year.
Initial claims for unemployment fell again this week to 388,000 and even the 4 week moving average, generally believed to be a better indicator of the status of the jobs market, fell below 400,000. Once again it is worth mentioning that as the holiday season approaches unemployment numbers typically decline as retailers hire workers for the temporary holiday rush. Since those workers are often let go after the holiday season is over, it will likely be January before the true status of the jobs market can be judged again.
Mario Monti took over as Italy’s Prime Minister on Wednesday, replacing Silvio Berlusconi and completely overhauling the Italian government. Monti also announced that he would be the Finance Minister for the time being until a “suitable candidate” can be appointed. The new Italian government is now composed entirely of unelected technocrats and Monti overwhelmingly won a vote of confidence in both houses of Italy’s government on Thursday and Friday. Prime Minister Monti has vowed not only to implement the austerity reforms passed by the previous government, but to add even more austerity measures to attempt to bring Italy back from the brink of financial ruin.
News out of Greece was relatively muted given the events happening in Italy this week. Quickly moving to the front burner however is a loophole that has been exposed in Credit Default Swaps as a result of the deal reached in October for Greek bondholders to take a 50% “haircut” on their existing bonds. CDS contracts are supposed to offer “insurance” against a bond default, but it turns out that the deal reached on Greek bonds, which is technically a default, will not trigger payouts of the CDS contracts purchased against those bonds. According to the International Swaps and Derivatives Association, the plan announced by Eurozone leaders in October failed to meet the “fine print” definition of a default under ISDA rules. According to ISDA rules, payouts can only be made if a restructuring is mandatory or if a “collective action clause” is invoked. It turns out that 90 percent of Greek government bonds have no such clause and the deal announced by Eurozone leaders stated that the 50% “haircut” was voluntary. Why does all of this matter? Deutsche Bank decided to reduce its exposure to Italian government bonds earlier this year by purchasing CDS contracts on them, allowing them to reduce their net exposure from 8 billion euros down to 1 billion euros. If those CDS contracts don’t qualify for a payout then Deutsche Bank’s exposure to Italy increases by a factor of 7 over what they are reporting since their CDS contracts might not get paid out. The question is, how many other banks find themselves in this same situation?
Next up on the news horizon out of the Eurozone is Spain. Spain sold 10 year bonds at a yield of 6.975% this week, the highest that country has had to pay since 1997. Yields were headed even higher after the auction until the European Central Bank intervened.
Crude oil crossed the $100 a barrel barrier once again this week before dropping back into the upper $90 dollar ranges during Thursday’s market downturn.
The euro continued its decline against the dollar this week, still pressured by the uncertainty in the Eurozone over its sovereign debt woes. The Japanese yen climbed against the dollar at the start of the week, but then traded flat against it to finish out the week.
Friday to Friday Close
| November 11th | November 18th | Net Change | |
|---|---|---|---|
| Gold | $1787.00 | $1725.00 | (62.00) – 3.47% |
| Silver | $34.66 | $32.40 | (2.26) – 6.52% |
| Platinum | $1645.00 | $1590.00 | (55.00) – 3.34% |
| Palladium | $661.00 | $605.00 | (56.00) – 8.47% |
| Dow Jones | 12153.68 | 11782.38* | (371.30) – 3.06% |
Previous Year Comparisons
| November 19th, 2010 | November 18th, 2011 | Net Change | |
|---|---|---|---|
| Gold | $1352.00 | $1725.00 | 373.00 + 27.59% |
| Silver | $27.17 | $32.40 | 5.23 + 19.25% |
| Platinum | $1671.00 | $1590.00 | (81.00) – 4.85% |
| Palladium | $704.00 | $605.00 | (99.00) – 14.06% |
| Dow Jones | 11203.55 | 11782.38* | 578.83 + 5.17% |
* Current at time of writing
Here are your Short Term Support and Resistance Levels for the upcoming week.
| Gold | Silver | |
|---|---|---|
| Support | 1710/1680/1650 | 31.80/31.00/30.00 |
| Resistance | 1740/1780/1800 | 33.00/33.70/34.00 |
| Platinum | Palladium | |
|---|---|---|
| Support | 1575/1560/1520 | 600/580/550 |
| Resistance | 1625/1675/1700 | 625/640/675 |
Volatility should be expected to continue. JP Morgan et al engineered another price decline this week that may be presenting an excellent opportunity to purchase precious metals at a discount. The fundamentals that support owning precious metals in your investment portfolio are still present, and even seem to be becoming more firmly entrenched. Jeff Clark, of Big Gold, writing in the Casey Daily Dispatch this week made a perfect case for taking the long term view on investing in precious metals and buying price dips as they occur. Mr. Clark charted gold price corrections of 8% or more on a daily, monthly, quarterly and annual basis beginning in January of 2002 and ending in September of 2011. When charted on a daily basis, there were 10 corrections of 8% or more that appeared. On the monthly chart that number drops to 5 corrections of 8% or more, in the quarterly chart there is one correction of 8%, and when viewed on the annual chart, there are no visible corrections at all. The annual chart shows a steady increase, with no corrections to the downside, from 2002 to 2011 of more than 433% in the price of gold. If that doesn’t make the case for long term ownership of precious metals, I don’t know what other evidence you need. The IMF this week refused to release the next tranche of bailout funding to Greece saying “It’s important that the unity government now shows its commitment to the implementation of the economic program.” The IMF went on to say further that the review and release of the tranche can occur once “broad political support” is assured. The new and un-elected governments in both Italy and Greece face seemingly insurmountable odds as they try to rein their spiraling debt issues in and pull themselves back from the brink of financial ruin. The yields on the Spanish bond auction may be indicating that Spain could be sliding into the debt sewer behind Greece and Italy. Smaller peripheral countries such as Portugal and Ireland that are suffering their own sovereign debt woes seem to have completely fallen off the news radar when compared to the size and scope of what is happening in Greece, Italy and now perhaps Spain. The “super committee” in the US Congress looks to be devolving into bickering and arguing amongst themselves as has so often been the case with this particular Congress. Failure to reach a deal on spending cuts by next week’s deadline may lead to another credit rating downgrade for the US. All of these events seem to be adding to the fundamental reasons for owning precious metals in your portfolio. When taking the long term view, as PMI has always stated should be the approach to investing in precious metals, Mr. Clark’s charting exercise shows that purchasing additional precious metals when presented with a price dip would have yielded you progressively higher returns as the years went by. 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.
© 2013, Precious Metals International Ltd.
www.wwpmc.com
The Week in Review – November 18th, 2011
Posted by Worldwide Precious Metals on Friday, November 18, 2011
The Week in Review – November 14th, 2011
November 14, 2011
It was another crazy week in the stock market. Most of this week’s news was driven by raw fear revolving around Europe as Italy began shaping up to be the next victim of the widening sovereign debt crisis in there. Bond markets in the US were closed on Friday in observance of Veteran’s Day.
There was good news on multiple fronts in the US this week. Initial claims for unemployment dropped below 400,000 and initial readings on consumer sentiment were at their highest level in the past five months. The media was quick to put a positive spin on the jobs numbers and glossed over, just as they did last year, the fact that this time of year nearly always sees a jump in job growth as retailers begin their temporary hiring for the holiday season. It will likely be January, after the temporary holiday positions come to an end, before a true picture of the status of the jobs market emerges now.
In Italy, Prime Minister Silvio Berlusconi has apparently stated that he will resign once a new budget law containing austerity and reform measures which it is hoped will boost the Italian economy receives parliamentary approval. Berlusconi failed to win a vote of confidence on Tuesday and stated that if both of Italy’s houses pass the new law he will step down and turn power over to a coalition style government similar to the one being formed in Greece.
Greece’s two main parties finally agreed on Thursday to name former European Central Bank Vice President Lucas Papademos as the next Prime Minister. Papademos will oversee the “coalition government” which was negotiated by ousted Prime Minister Papandreou as a condition of his resignation. The search for a suitable candidate was both ugly and highly political, at one point even collapsing completely on Wednesday, infuriating the Greek public and the country’s international lenders. The new coalition government will rule Greece until early elections can be held likely in February of 2012. Papademos was sworn in on Friday along with a new cabinet.
On Thursday, Standard & Poor’s sent an erroneous message to some of its customers announcing the downgrade of France’s credit rating, sparking off the worst day for French government bonds since 1999. S&P did not issue a statement regarding the error until almost two hours after it occurred, saying that the message resulted from a technical error and was not an indication of any action which it intended to take against France. “If recipients had clicked on the link in the alert, they would have seen that France’s rating was unchanged” said S&P’s spokesperson Martin Winn via e-mail to Reuters. Mr. Winn declined to elaborate further on any possible cause for the glitch.
On Tuesday, just a week after Freddie Mac requested approximately $6 billion in additional aid from US taxpayers, the regulator for Fannie Mae and Freddie Mac defended $12.79 million dollars in bonuses which were paid out to just 10 executives to supposedly keep needed talent at the firms. Edward DeMarco, acting director for the Federal Housing Finance Agency, unapologetically said “I need to ensure that the companies have people with the skills needed to manage the credit and interest rate risks of $5 trillion worth of mortgage assets and $1 trillion of annual new business that the American taxpayer is supporting.”
Crude oil continued pushing higher this week, pushing to $98.55 a barrel on an expected increase in oil demand. The International Energy Agency said on Wednesday that if investment in North Africa and the Middle East is lower than required to meet demand growth from emerging economies then oil may hit $150 a barrel in the near term.
The euro ended the week down against the dollar once again as the sovereign debt issues in Greece, and now Italy, continued to hammer the unified currency. The Japanese yen bumped along essentially sideways for the first part of the week but ended the week higher against the dollar.
Friday to Friday Close
| November 4th | November 11th | Net Change | |
|---|---|---|---|
| Gold | $1755.00 | $1787.00 | 32.00 + 1.82% |
| Silver | $34.06 | $34.66 | 0.60 + 1.76% |
| Platinum | $1628.00 | $1645.00 | 17.00 + 1.04% |
| Palladium | $654.00 | $661.00 | 7.00 + 1.07% |
| Dow Jones | 11983.24 | 12171.09* | 187.85 + 1.57% |
Previous Year Comparisons
| November 12th, 2010 | November 11th, 2011 | Net Change | |
|---|---|---|---|
| Gold | $1365.00 | $1787.00 | 422.00 + 30.92% |
| Silver | $25.94 | $34.66 | 8.72 + 33.62% |
| Platinum | $1683.00 | $1645.00 | (38.00) – 2.26% |
| Palladium | $673.00 | $661.00 | (12.00) – 1.78% |
| Dow Jones | 11192.58 | 12171.09* | 978.51 + 8.74% |
* Current at time of writing
Here are your Short Term Support and Resistance Levels for the upcoming week.
| Gold | Silver | |
|---|---|---|
| Support | 1750/1700/1680 | 33.80/33.25/32.50 |
| Resistance | 1800/1820/1850 | 35.00/35.70/36.50 |
| Platinum | Palladium | |
|---|---|---|
| Support | 1625/1600/1540 | 650/630/600 |
| Resistance | 1675/1700/1750 | 675/700/730 |
Volatility should be expected to continue. The sovereign debt situation in Europe continues to destabilize with Italy apparently following in the footsteps of Greece and faster than anyone expected. As one CNBC commentator put it, Italy is “too big to fail, and too big to bail out”. In perhaps what may be a preview of the expanding collateral damage of the debt explosion that began in Greece, Austria was forced to react this week to market fears that its AAA credit rating may take a downgrade due to exposure to Italy by posting a statement on the web defending their AAA rating. Austria’s parliament will meet next week to discuss and vote on a new austerity budget. Jim Rogers, chairman and CEO of Rogers Holdings, said on Wednesday “We’re certainly going to have more crises coming out of Europe and America; the world is in trouble.” Rogers added “Last time, America quadrupled its debt. The system is much more extended now, and America cannot quadruple its debt again, Greece cannot double its debt again, the next time around is going to be much worse. In 2002 it was bad, in 2008 it was worse and 2012 or 2013 is going to be worse still – be careful.” In India, long holding a place as one of the largest areas of demand for gold in the form of jewelry, investors are apparently moving from funds that invest in bonds to funds that invest in gold instead. Debasish Mallick, CEO at IDBI Asset Management Ltd., said “There is asset-switching, and people are betting more on gold as it is a safer asset and offers a hedge against India’s high inflation and the economic uncertainty affecting the world.” Chinese gold imports from Hong Kong hit a record high in September. Analysts expect the rise in imports to continue until the end of the year as Chinese New Year approaches since this is one of China’s largest gold buying periods. The Chinese government in Beijing does not publicly disclose its gold imports so most analysts use Hong Kong’s figures as a proxy for the overall direction that Chinese imports are taking and Hong Kong’s figures increased by a factor of 6 compared to the 2010 figures. This weekend promises to be as newsworthy as last weekend, with both Greece and Italy trying to hammer out the details for their austerity plans which will now apparently be implemented by newly formed coalition governments in both of those countries. As was well evidenced this week, any news out of Europe can cause extreme volatility as traders and investors make decisions based on fear and emotion instead of fundamentals and sound thinking. Doing your homework and maintaining a cool head in these uncertain times is critical to recognizing buying opportunities for precious metals as the situation in Europe unfolds. If anything, the uncertainty in the Eurozone has become even greater now that both Greece and Italy will be changing their governments and if fear takes hold over the weekend as Italy completes the vote on its austerity package, precious metals prices may see a sudden and rapid explosion to the upside. 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.
© 2013, Precious Metals International Ltd.
www.wwpmc.com
The Week in Review – November 14th, 2011
Posted by Worldwide Precious Metals on Monday, November 14, 2011
The Week in Review – November 4th, 2011
November 4, 2011
What a busy week for news! We had a Fed meeting in the US; Europe seemed to be accelerating into an implosion, courtesy of Greece; and in the United States, MF Global Holdings melted down, leaving everyone asking “where were the regulators?” once again.
On Wednesday in the US, the Federal Reserve cut its forecast for economic growth in 2012 and 2013 and raised its forecast for unemployment for the remainder of this year, as well as 2012 and 2013. Their new forecast calls for economic growth of just 2.5 percent to 2.9 percent in 2012. As recently as June they were projecting growth of 3.3 to 3.7 percent for next year. For unemployment, the Fed now expects it to go no lower than 8.5 to 8.7 percent by the end of next year, up from their projections in June of 7.8 to 8.2 percent. Many had expected a possible announcement of further Quantitative Easing but the Fed was silent on the subject, leaving its options open for the future.
Businesses in the US created a mere 80,000 new jobs in October, and unemployment edged only slightly downward to 9 percent. Economists had expected at least 100,000 jobs to be created for October and were disappointed by the data. On a positive note, September’s jobs creation numbers were revised much higher and August numbers which had initially come in at zero jobs created, were revised upward for the second time. Kathy Bostjancic, director of macroeconomic analysis at The Conference Board said, regarding the jobs report, “While it may be enough to barely escape recession, the gain in jobs and incomes is not enough to offset consumer pessimism.” Dan Greenhaus, global market strategist at BTIG, went so far as to say “We have to remind ourselves that things are so bad that this looks good. In the context of what we’re living through, it’s not a bad report.”
On the heels of the frantic weekend negotiations that resulted in European Union leaders agreeing to provide further aid to Greece last week, Greek Prime Minister George Papandreou infuriated those same leaders on Monday by calling for a referendum on that bailout deal. The move sent the euro tumbling and had many speculating on the imminent collapse of the European Union itself. The move appears to have been a pure political gamble on the part of Papandreou designed to garner support for the bailout package by the opposition party in Greece. Once the opposition party announced that they would support the bailout package as agreed upon last week, the plans for the referendum were dropped. A confidence vote which will be held Friday at midnight will determine the next steps in the saga. If Papandreou survives the confidence vote then he will supposedly step down and hand power over to a negotiated coalition government. If he loses that confidence vote then there may be calls for “snap elections”, throwing the fate of the bailout package for Greece right back into the air again as the government changes hands in an uncontrolled fashion.
MF Global Holdings, whose financial troubles first entered the news last week, filed for Chapter 11 bankruptcy protection on Monday. The firm’s exposure to European sovereign debt appears to be what took it down and that makes it the first US firm to become a casualty of its exposure to Europe’s debt woes. John Corzine, former governor of New Jersey and one-time chief of Goldman Sachs, resigned his post as CEO and chairman on Friday and will not be seeking severance pay.
On Wednesday, Freddie Mac said it will seek an additional $6 billion in aid at the cost of more US taxpayer dollars. The government owned mortgage giant reported its worst quarterly loss so far this year, coming in at $4.4 billion, a staggering increase when compared to its second quarter losses of $1.1 billion.
Crude oil and gasoline inventories both rose this week but oil continued to hover around the mid-$90 a barrel range despite the increase in supply that would normally pressure prices in the downward direction.
The euro nosedived against the dollar for most of the week due to the politicking taking place in Greece. Japan’s intervention into the currency market this week caused the yen to fall off a cliff against the dollar for the week as well. Tokyo says it intends to keep intervening until it is “satisfied with the results”.
Friday to Friday Close
| October 28th | November 4th | Net Change | |
|---|---|---|---|
| Gold | $1746.00 | $1755.00 | 9.00 + 0.52% |
| Silver | $35.25 | $34.06 | (1.19) – 3.38% |
| Platinum | $1650.00 | $1628.00 | (22.00) – 1.33% |
| Palladium | $665.00 | $654.00 | (11.00) – 1.65% |
| Dow Jones | 12231.11 | 11895.00* | (336.11) – 2.75% |
Month End to Month End Close
| September 30th | October 31st | Net Change | |
|---|---|---|---|
| Gold | $1620.00 | $1724.00 | 104.00 + 6.42% |
| Silver | $30.10 | $34.32 | 4.22 + 14.02% |
| Platinum | $1520.00 | $1605.00 | 85.00 + 5.59% |
| Palladium | $612.00 | $650.00 | 38.00 + 6.21% |
| Dow Jones | 10913.38 | 11955.01 | 1041.63 + 9.54% |
Previous year Comparisons
| Nov. 5th 2010 | Nov 4th 2011 | Net Change | |
|---|---|---|---|
| Gold | $1396.00 | $1755.00 | 359.00 + 25.72% |
| Silver | $26.72 | $34.06 | 7.34 + 27.47% |
| Platinum | $1767.00 | $1628.00 | (139.00) – 7.87% |
| Palladium | $685.00 | $654.00 | (31.00) – 4.53% |
| Dow Jones | 11444.08 | 11895.00* | 450.92 + 3.94% |
* Current at time of writing
Here are your Short Term Support and Resistance Levels for the upcoming week.
| Gold | Silver | |
|---|---|---|
| Support | 1750/1720/1700 | 33.80/33.20/32.50 |
| Resistance | 1770/1800/1850 | 34.75/35.20/36.00 |
| Platinum | Palladium | |
|---|---|---|
| Support | 1625/1600/1550 | 650/625/600 |
| Resistance | 1650/1680/1700 | 675/700/720 |
Volatility should be expected to continue. The situation in Greece is coming to a head and won’t be decided until after the markets close for the week. The confidence vote happens tonight at midnight local Greece time and the fate of the bailout that was agreed upon last week for the debt plagued country hangs in the balance. Should the confidence vote for the current government fail this evening then the region could devolve into chaos as the Greek government changes hands in snap elections which could mean a complete re-vamp of the rules involved in receiving the bailout funding that the EU agreed upon last week. Japan’s intervention into the currency markets to try to rein in the skyrocketing yen once again showed that fiat currencies can be devalued at any time for any reason by the governments that print them. James Turk, in an interview with King World News this week said “This intervention by the Japanese central bank is a good example of what is wrong with national currencies. Central banks everywhere are trying to debase their currencies and Japan is just the latest episode. A few weeks ago it was the Swiss National Bank and we’ve seen continuous debasement by the Federal Reserve with its dollar money printing and artificially low interest rates. This is exactly what happened in the Great Depression. Back then they called it ‘Beggar thy neighbor.’” Mr. Turk continued, saying “When all countries are aiming to debase their currency, the conclusion is quite obvious. First, you will see money rushing from one currency to another, depending on what central banks are doing at that moment. Second, and more importantly, all currencies are being debased against gold, so its price will rise. The value of gold comes from the market and not from central banks. Central banks can debase currencies, but they cannot debase gold.” Mr. Turk also re-stated his belief that gold and silver are both heading higher in that interview, calling for a price on silver of $60 or even $75. If this market behaves the way Mr. Turk believes that it will, now may be an excellent time to enter the precious metals market. Pay attention to the news out of Greece over the weekend and look for buying opportunities as the world assesses the true depth of the sovereign debt situation in Europe in the aftermath of the Greek confidence vote tonight. 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.
© 2013, Precious Metals International Ltd.
www.wwpmc.com
The Week in Review – November 4th, 2011
Posted by Worldwide Precious Metals on Friday, November 4, 2011
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