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The Week in Review – June 29th, 2012
June 29, 2012
The extreme volatility in the market was never more evident than this week. Thursday’s selloff appears to have been triggered purely by panic and fear over the situation in Europe. Today’s turnaround following the EU Summit announcement shows exactly why it is so vital to maintain ownership of your precious metals products in times of fear and uncertainty.
Initial claims for unemployment dropped 6,000 last week, but some of the drop was the result of the previous week’s figures being revised higher once again. The fact that claims still remain at levels comparable all the way back to April only serves to reinforce the idea that the labor market continues to show fundamental weakness.
The final reading for June of the Thomson Reuters/University of Michigan index on consumer sentiment saw the index hit its lowest level of the year. Much of the drop was attributed to households with incomes over $75,000 which, it appears, have sharply curtailed their buying plans as economic data has weakened.
In the early morning hours in Brussels, Belgium, following a long night of negotiations European Union leaders announced Friday that they had agreed to take action to bring Spain and Italy’s escalating borrowing costs down. The agreement allows the Eurozone rescue funds known as the EFSF and ESM to be used in a more flexible fashion, without the extra austerity measures that have been forced upon Greece, Ireland, and Portugal. The ESM in particular will now be able to lend directly to recapitalize banks without adding to the receiving country’s budget deficit.
In a move that should, at this point, surprise no one, yet another big bank was hit with market manipulation charges this week. Barclays settled allegations that it manipulated the key lending rate known as LIBOR. According to the settlement, Barclays bankers and traders, including senior managers, regularly misreported what it cost the bank to borrow money and did so in collusion with other banks to manipulate their lending rates as well. Barclays will pay $200 million to the Commodity Futures Trading Commission, the largest such civil fine the CFTC has levied in history, $160 million to settle US Department of Justice charges, and $93 million to the UK Financial Services Authority. The manipulation of LIBOR has far-reaching effects and Barclays will certainly be facing a slew of class action suits in response to the scheme. Other banks potentially involved in the scheme are Deutsche Bank, Credit Suisse, RBS, Lloyds and UBS.
JP Morgan continues to try to unwind its failed “London Whale” series of trades. Reports now place the losses that will be endured by the bank at between $4 billion and $9 billion dollars. Despite the escalating figure, Jamie Dimon continues to say that any losses as a result of the failed trades can easily be absorbed by the bank.
The outcome of the European Summit may once again spark further outrage in Greece as they see further evidence that the bailout conditions that they were forced to agree to now seem to no longer be required by their surrounding neighbors that are in similar trouble. As the fragile Greek government tries to piece itself together after its recent elections, Friday’s announcement is sure to increase the pressure for the new Greek government to renegotiate its current bailout agreements.
Crude oil pushed its way back above the $80 mark following the announcement out of the European Summit regarding a reconfigured relief plan, particularly tailored to come to the aid of Spain and Italy.
The euro tumbled lower this week amid fear and concern over the situation in Europe. The Japanese yen moved erratically this week, spiking higher, and then dropping amid Thursday’s selloff only to reverse course again to move higher on Friday.
Friday to Friday Close
| June 22nd | June 29th | Net Change | |
|---|---|---|---|
| Gold | $1567.00 | $1604.00 | 37.00 + 2.36% |
| Silver | $26.70 | $27.60 | 0.90 + 3.37% |
| Platinum | $1453.00 | $1447.00 | 12.00 + 0.84% |
| Palladium | $606.00 | $582.00 | (24.00) – 3.96% |
| Dow Jones | 12640.78 | 12834.64* | 193.86 + 1.53% |
Month End to Month End Close
| May 31st | June 29th | Net Change | |
|---|---|---|---|
| Gold | $1563.00 | $1604.00 | 41.00 + 2.62% |
| Silver | $27.80 | $27.60 | (0.20) – 0.72% |
| Platinum | $1415.00 | $1447.00 | 32.00 + 2.26% |
| Palladium | $612.00 | $582.00 | (30.00) – 4.90% |
| Dow Jones | 12393.45 | 12834.64* | 441.19 + 3.56% |
Previous year Comparisons
| Jul 1st 2011 | June 29th 2012 | Net Change | |
|---|---|---|---|
| Gold | $1483.00 | $1604.00 | 121.00 + 4.40% |
| Silver | $33.70 | $27.60 | (6.10) – 18.10% |
| Platinum | $1715.00 | $1447.00 | (268.00) – 15.63% |
| Palladium | $757.00 | $582.00 | (175.00) – 23.12% |
| Dow Jones | 12582.77 | 12834.64* | 251.87 + 2.00% |
* Current at time of writing
Here are your Short Term Support and Resistance Levels for the upcoming week.
| Gold | Silver | |
|---|---|---|
| Support | 1590/1560/1530 | 27.20/27.00/26.50 |
| Resistance | 1610/1630/1650 | 28.00/28.50/29.00 |
| Platinum | Palladium | |
|---|---|---|
| Support | 1425/1400/1385 | 560/550/525 |
| Resistance | 1475/1500/1520 | 600/615/640 |
Volatility should be expected to continue as this week has dramatically shown. The outcome of the European Summit announced on Friday seems to have set off a bout of euphoria that Europe may finally be on the path to resolving its massive sovereign debt woes. Legendary investor Jim Rogers disagreed, telling CNBC “Just because now you have a way to get them [the banks] to borrow even more money, this is not solving the problem; this is making the problem worse. People need to stop spending money they don’t have. The solution to too much debt is not more debt. All this little agreement does is give them [banks] a chance to have even more debt for a while longer.” Mediocre jobs numbers in the US point to continuing weakness in the jobs market and that may yet lead to a need for additional monetary easing by the Federal Reserve. Thursday’s announcement that the Supreme Court upheld president Obama’s healthcare law on grounds that the “individual mandate” was a tax and not a penalty may also have the unintended effect that small businesses may begin cutting costs or putting off hiring in order to pay for their increased healthcare costs due to items mandated by the law. US Gross Domestic Product grew at just 1.9 percent in the first quarter and the apparently weakening job market, a slowdown in consumer spending and the ever churning Eurozone sovereign debt crisis may indicate that growth won’t get any better in the second quarter. Next week, the European Central Bank holds its next policy meeting and there is growing sentiment that Mario Draghi may be contemplating cutting the deposit rate below its current 0.25%, a tactic rarely used by Central Banks. Cutting the deposit rates to zero, or lower, could mean the ECB would start charging financial institutions for the money they deposit with it overnight. The expectation is that such a move might encourage banks to start lending their cash instead of parking it with the ECB, but many think the opposite effect, in the form of additional credit contraction, might be the result instead. In a powerful interview with King World News, Eric Sprott of Sprott Asset Management said, when asked what he expected going forward, “Continuing contagion, maybe with some kicking of the can down the road, which we’ve been doing for a long time now. But the day is coming when we’re all going to realize that the debts can’t be paid. You’ve got to shed paper assets and you’ve got to own physical gold and physical silver. The system is imploding on itself, but the central planners want everyone to think it’s fine. They just lie to us. ‘We have an agreement.’ No you don’t have an agreement. ‘We have a Spanish bank bailout plan.’ No you don’t have a Spanish bank bailout plan. You don’t have a plan, you just say you have a plan. There is no plan. Of course, they are probably in buying the banks stocks, just to make it look like they really do have a plan, but there is no plan, no formalized plan, no agreed to plan. It’s all just vaporware.” The situation in Europe seems to be gaining an air of desperation and the euphoria over this latest bailout plan may quickly fade. Taking advantage of buying opportunities, such as those presented on Thursday, to purchase additional precious metals products for your portfolio may help you weather the readily apparent, and steadily oncoming, financial storm. 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. Always remember that you should 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 29th, 2012
Posted by Worldwide Precious Metals on Friday, June 29, 2012
The Week in Review – June 22nd, 2012
June 22, 2012
It was a rough week in the markets. The media had hyped the Greek elections and the Federal Reserve meeting this week as major events that could be a turning point in the growing global financial crisis. Both events came and went and appear not to have “moved the needle” at all. The disappointment over the lack of definitive action seems to have factored heavily in triggering Thursday’s sell off across all markets.
Economic data out of the US was disappointing once again this week. Manufacturing grew at its slowest pace in 11 months in June and initial claims for unemployment only declined due to an upward revision in the previous week’s data. The four week moving average of unemployment claims, which is considered to be a better measure of the state of the US labor market, moved to its highest level since early in December.
Wednesday’s comments by Federal Reserve Chairman Ben Bernanke following the conclusion of this week’s meeting seemed to be a massive disappointment for the markets. The Fed did agree to extend “Operation Twist”, but the market was hoping for an outright promise of additional Quantitative Easing. The Fed, citing further slowdown in the US economy, said it was “Prepared to take further action” with Chairman Bernanke stating “Yes, additional asset purchases are among the things we would consider if we need to take additional measures to strengthen the economy.” Mr. Bernanke continued, saying “We’re prepared to do more. We have to get additional information on the state of the economy, what’s happening in Europe.”
On Thursday Christine Lagarde, Managing Director of the International Monetary Fund, said “A determined and forceful move towards complete European monetary union should be reaffirmed in order to restore faith. At the moment, the viability of the European monetary system is questioned.” Ms. Lagarde continued, saying “There must be a recapitalization of the weak banks, with preferably a direct link between the European Financial Stability Facility/ESM and the banks, without going through the sovereign, in order to break the negative feedback loop that we have between banks and sovereigns.”
Independent auditors in Spain have estimated that the besieged banks in that country may need up to 62 billion euros in fresh capital to bail them out. Borrowing costs for the latest member of the Eurozone to succumb to its massive debt load have spiked to their highest levels in 15 years.
The Greek elections went off successfully this week with the pro-bailout parties appearing to have carried the day. New Prime Minister Antonis Samaras however, has spent this week attempting to re-negotiate the terms of the very bailout that he promised to uphold. A “senior Eurozone official” told Reuters on Tuesday “Anybody who would say that we need not, and cannot renegotiate the Memo of Understanding (MoU) is delusional, because he, or she, would be under the understanding that the whole program, the whole process, has remained completely on track ever since the weeks before the Greek first election. Because the economic situation has changed, the situation of tax receipts has changed, the rhythm of implementation of the milestones has changed, the rhythm of privatization has changed, if we were not to change the MoU, it does not work.” This appears to have been directly aimed at German Chancellor Angela Merkel who is adamantly opposed to renegotiating the bailout agreement.
Moody’s followed through on its downgrade of 15 major banks this week with the announcement coming late on Thursday after markets were closed. Friday saw very little reaction to the downgrade as most analysts feel that the move has been telegraphed for months and was therefore already priced into the markets. The fallout will still be felt by the banks themselves as the credit rating downgrades will likely cost those banks their borrowing costs spike higher and they are required to post higher collateral amounts against trades. Some analysts project that the additional costs to these banks may reach into the billions.
Crude oil broke through the $80 floor this week amid poor economic data out of the US and China, and continued pressure coming from the crisis in Europe.
The euro struggled higher against the US dollar for much of the week, but reversed course amid Thursday’s mass selloff in the markets. The yen traded essentially sideways for most of the week, but also saw a steep and sharp decline amid Thursday’s mass selloff.
Friday to Friday Close
| June 15th | June 22nd | Net Change | |
|---|---|---|---|
| Gold | $1628.00 | $1567.00 | (61.00) – 3.75% |
| Silver | $28.75 | $26.70 | (2.05) – 7.13% |
| Platinum | $1487.00 | $1453.00 | (52.00) – 3.50% |
| Palladium | $630.00 | $606.00 | (24.00) – 3.81% |
| Dow Jones | 12767.17 | 12655.50* | (111.67) – 0.87% |
Previous year Comparisons
| June 24th, 2011 | June 22nd, 2012 | Net Change | |
|---|---|---|---|
| Gold | $1501.00 | $1567.00 | 66.00 + 4.40% |
| Silver | $34.65 | $26.70 | (7.95) – 22.94% |
| Platinum | $1675.00 | $1435.00 | (240.00) – 14.33% |
| Palladium | $730.00 | $606.00 | (124.00) – 16.99% |
| Dow Jones | 11934.58 | 12655.50* | 720.92 + 6.04% |
* Current at time of writing
Here are your Short Term Support and Resistance Levels for the upcoming week.
| Gold | Silver | |
|---|---|---|
| Support | 1550/1525/1500 | 26.50/26.20/26.00 |
| Resistance | 1580/1600/1640 | 27.00/27.50/28.00 |
| Platinum | Palladium | |
|---|---|---|
| Support | 1420/1400/1385 | 600/585/560 |
| Resistance | 1450/1480/1500 | 620/640/670 |
Volatility should be expected to continue and may increase dramatically in the coming weeks. This week seems to have presented a perfect buying opportunity to get back into the precious metals market. Poor economic data out of the US, China, and the ongoing and escalating crisis in the Eurozone all seem to have led to an unwarranted selloff. George Gero, RBC Capital Markets Precious Metals Strategist, told CNBC “Gold has been selling off because of all the anti-inflationary headlines. Fed warning on the economy, weak employment data, weak manufacturing data are all anti-inflationary.” Mr. Gero agreed with a report by Barclays Capital Management which said that the long-term macro picture for gold remains bullish, saying “Every time we have had a sell-off, it’s turned out to be a buying opportunity.” Egon von Greyerz, founder and managing partner at Matterhorn Asset Management in Switzerland, told King World News this week “Eric, the entire financial system is under immense pressure. First you have the EFSF, the European Stability Fund, they are saying they must buy euro debt. The problem is that fund is now just 440 billion euros, which is nowhere near enough to support all of these failing European countries or their banking systems.” Mr. von Greyerz continued, saying “The risk in the financial world as a whole right now is enormous. The Fed knows this and they are trying to avoid direct QE, but they will not be able to do that for very long.” The long term fundamental picture for owning precious metals remains unchanged. The market has become entrenched in a vicious cycle of alternating fear and disappointment and has strayed far from trading on the true fundamentals. It is imperative that you keep the true fundamentals of investing in precious metals over the long term clear in your mind during these times of uncertainty. This fear and uncertainty may well be presenting the perfect buying opportunity to add more precious metals to your portfolio at a discount. Slowly and steadily, fear and uncertainty will evolve into shock and realization when it becomes apparent that the stopgap measures that the world’s governments and Central Banks have desperately tried in order to save the fiat currency system have failed. As these same Central Banks are forced to print more and more money, under the guise of “monetary easing”, to bail out the failing banking systems and address massive governmental debt loads in this interconnected global financial world we all live in, fiat currencies will continue to lose value. As fiat currencies lose their value, inflation will take hold, perhaps even moving straight into hyperinflation. If that hyperinflationary move takes place, precious metals prices may move to astronomical levels that make today’s prices look miniscule in comparison. Every solution under discussion in the Eurozone seems to involve printing more money. Even the US Federal Reserve is giving significantly stronger hints that more Quantitative Easing may be on the way, which means more money printing. In that environment, owning precious metals, accumulating more on any temporary price dips, and holding on to your product for the long term as the global financial system shows further signs of completely coming apart seems like the best way to be prepared for the eventual collapse of the fiat currency system. 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. Always remember that you should 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 22nd, 2012
Posted by Worldwide Precious Metals on Friday, June 22, 2012
The Week in Review – June 15th, 2012
June 15, 2012
Europe continues to foster uncertainty in the market this week. Spain was indeed offered a bailout over the weekend, as expected, and if anything it seems to have made the situation in Europe even worse, particularly in Greece. The terms of the Spanish bailout appear to be much less onerous than those agreed to by Greece and seem to have given leverage to the leftist parties in the upcoming Greek weekend election.
Economic data out of the US was extremely disappointing this week. Initial claims for unemployment climbed again, the fifth time in 6 weeks that it has done so. Manufacturing output in the US contracted in May and a number of regional surveys in June, such as the New York Fed’s “Empire State” general conditions index also saw steep drops. The initial reading of the Thomson Reuters/University of Michigan’s Consumer Sentiment index fell to six month lows. Survey director Richard Curtin said “Income losses were reported by nearly one-third of all households in early June and the news reaching consumers about job prospects turned negative for the first time since late 2011.”
Oddly, the US stock market surged higher following Thursday’s less than stellar jobs numbers. It seems to be widely viewed that the slowing US economy and the ongoing and worsening crisis in Europe adds more pressure to the Federal Reserve to come through with additional monetary easing when it meets next week.
In the UK, the Bank of England announced in Friday that it will be implementing emergency liquidity-providing operations for UK banks beginning next week in an attempt to free up credit in Britain’s economy. The BOE said at least one “Extended Collateral Term Repo Facility” per month will be held until further notice with each one to offer at least 5 billion pounds.
Greece is front and center in the news as their elections take place over the weekend. The situation in Greece is becoming more and more desperate as crippling austerity measures forced upon the country as a result of its two bailout agreements appear to be doing more harm than good. Intellectual talent appears to be fleeing the country, many to Australia, searching for work and the rate at which bank deposits have been disappearing is even more alarming. Healthcare and utility costs are skyrocketing as a result of new taxes put into place as part of the austerity measures and many in the Greek populace simply can’t afford to pay the bills.
Moody’s downgraded Spain’s credit rating three more notches this week to Baa3 on grounds that the bailout announced over the weekend would raise the country’s debt burden. Moody’s said “the Spanish economy’s continued weakness makes the government’s weakening financial strength and its increased vulnerability to a sudden stop in funding a much more serious concern than would be the case if there was a reasonable expectation of vigorous economic growth within the next few years.”
US Foreclosure starts rose for the first time in over two years according to RealtyTrac, perhaps indicating that the banks have finally worked all the kinks out of their foreclosure procedures following the infamous “RoboSigning” incident. With the US apparently becoming a “renter nation”, it will fall to investors to purchase these properties and any failure on their part to take action on them may drive home prices lower yet again.
Crude oil remained in the mid-$80 a barrel range this week, under pressure by a reduced demand forecast by the International Energy Agency, continued evidence of a slowdown in China and the worsening crisis in Europe.
The euro continued to stumble along this week against the US dollar, and appears that it will end slightly higher on hopes that any chaos caused by the results of the Greek elections this weekend can be contained by central bank actions. The Japanese yen appears that it will end the week essentially sideways against the dollar.
Friday to Friday Close
| June 8th | June 15th | Net Change | |
|---|---|---|---|
| Gold | $1591.00 | $1628.00 | 37.00 + 2.33% |
| Silver | $28.50 | $28.75 | 0.25 + 0.88% |
| Platinum | $1425.00 | $1487.00 | 62.00 + 4.35% |
| Palladium | $611.00 | $630.00 | 19.00 + 3.11% |
| Dow Jones | 12554.20 | 12723.35* | 169.15 + 1.35% |
Previous year Comparisons
| June 17th, 2011 | June 15th, 2012 | Net Change | |
|---|---|---|---|
| Gold | $1538.00 | $1628.00 | 90.00 + 5.85% |
| Silver | $35.75 | $28.75 | (7.00) – 19.58% |
| Platinum | $1750.00 | $1487.00 | (263.00) – 15.03% |
| Palladium | $742.00 | $630.00 | (112.00) – 15.09% |
| Dow Jones | 12004.36 | 12723.35* | 718.99 + 5.99% |
* Current at time of writing
Here are your Short Term Support and Resistance Levels for the upcoming week.
| Gold | Silver | |
|---|---|---|
| Support | 1610/1588/1533 | 28.20/27.78/26.80 |
| Resistance | 1635/1658/1697 | 29.10/30.38/31.48 |
| Platinum | Palladium | |
|---|---|---|
| Support | 1455/1428/1397 | 610/580/550 |
| Resistance | 1485/1520/1561 | 652/678/708 |
Volatility should be expected to continue and may increase dramatically in the coming weeks. This weekend, once again, it is vitally important to monitor the news. The Greek elections taking place over the weekend may lead to chaos in the European Union should the left-leaning parties take control and refuse to abide by the terms of Greece’s bailout conditions. Central banks around the globe are reportedly “set to act”, should it be required. Mario Draghi, president of the European Central Bank said “The ECB has the crucial role of providing liquidity to sound bank counterparties in return for adequate collateral. This is what we have done throughout the crisis, faithful to our mandate of maintaining price stability over the medium term – and this is what we will continue to do.” In other words, the ECB will continue to print money as it has since the crisis began. The uncertainty over the outcome of the Greek elections and the state of the Eurozone following those elections may lead to massive volatility next week as the markets absorb the fallout. Tensions between German Chancellor Angela Merkel and the new Socialist French President Francois Hollande appear to be getting worse. Ms. Merkel took the opportunity this week to make some criticizing remarks regarding Hollande’s plans to try to grow the French economy. Ms. Merkel also reiterated that she was still set against the idea of “euro bonds”, an idea which Hollande has declared he is in favor of. Fitch ratings agency said this week that all sovereign credit ratings in Europe, including the final four AAA rated members were at risk for downgrades unless they find a more lasting solution to the debt crisis washing over the Eurozone. The Spanish bailout agreed to over the weekend seemed to be shrugged off by the market in just a matter of hours on Monday. From the outside it appears that this is just another “quick fix” operation, the effects of which will be fleeting and temporary. Obviously the bailout doesn’t meet the “lasting solution” criteria that Fitch is looking for. Pay attention to every single news item that emerges out of Europe over this weekend. While it can be hoped for that media outlets will verify their stories before they air them, it is also important to keep in mind that with the sheer amount of uncertainty surrounding the Greece elections, it is highly likely that markets will move on nothing but headlines, rumors and sheer emotion when the market opens on Sunday night in Asia. The fact that the “G20″ central banks are standing ready to provide bailouts if chaos should ensue after the Greek elections take place means that they stand ready to print money, and print money, and print money, until they devalue their currencies to the point that they might as well be used for wallpaper or attic insulation. Stand ready to take advantage of any panic that may offer up buying opportunities to add more precious metals to your portfolio. The sense of urgency regarding the state of global finances seems to be growing and as it grows, the demand for precious metals may skyrocket, sending prices to astronomical levels. Whatever the triggering event that ignites the fuse under precious metals prices, if you are not poised and ready to act before the fuse is lit, it will be very difficult to try to catch the rocket after it leaves the launch pad. 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 15th, 2012
Posted by Worldwide Precious Metals on Friday, June 15, 2012
The Week in Review – June 8th, 2012
June 8, 2012
What a week for news! Europe, led by Spain, was the driving force behind markets this week for the most part. Once again, we will be going into the weekend with a slew of important data set to be released out of Europe and Asia.
Initial claims for unemployment fell by 12,000 last week, the first time claims have declined since April. Despite the drop, the four week moving average for new claims edged higher by 1,750 thanks to an upward revision in the previous week’s data. The four week moving average is considered a better read on the state of the jobs market than the weekly claims data so any increase there is still cause for concern.
In testimony before the US Congress’ Joint Economic Committee (JEC) on Thursday, Federal Reserve Chairman Ben Bernanke seemed to be taking the same stance as Mario Draghi, of the European Central Bank. Last week, Mr. Draghi told European parliament members that it is time for politicians to essentially step up and come forward with their own solutions to the crisis at hand. This week, Bernanke echoed that sentiment, telling the JEC “It would be much better to have a broad-based policy effort addressing a whole variety of issues. I leave the details to Congress, who have considered many of these issues.” Chairman Bernanke reiterated that the Fed stands ready to act if the economy slows further, but failed to give an outright guarantee that more Quantitative Easing was on the way.
Spain continues to struggle with its banking sector and is widely expected to formally request aid from the European Union as early as Saturday. In contrast to Greece, whom much of the Eurozone seems willing to let go of, Spain virtually has the Eurozone by the throat as a result of the sheer size of its economy. Spain, which has the fourth largest economy in the Eurozone, is being described as “too big to fail, too big to bail” at this point. On Thursday Fitch Ratings Agency cut Madrid’s sovereign credit rating by three notches, citing the Spanish banking sector’s exposure to failing property loans and contagion from Greece’s debt crisis. Fitch said that the cost to recapitalize Spain’s banks could be as high as 100 billion euros, while the International Monetary Fund estimates the figure to be a “mere” 50 billion.
Tension is mounting in Greece as the June 17th elections deadline approaches. The Greek economy shrank by 6.5% during the first quarter as crippling austerity measures, required as a condition for receiving the “troika’s” bailout money, continued to take a toll on tax revenues. Wage cuts and layoffs carried out as a result of the austerity measures seem to have done the exact opposite of what European leaders envisioned when they established those measures. While the measures have worked to lower government spending, they have also caused consumers to limit their spending in fear of losing their jobs, and the public sector layoffs have added to the unemployment woes in the country. Both factors have worked to seriously reduce tax revenues for the Greek government which was already plagued by tales of corruption in its tax collection efforts, making it more difficult for the government to reduce its budget gap.
China surprised economists and markets alike on Thursday when it cut its benchmark lending rates by 25 basis points. Most economists had expected a cut in the required reserve ratio for banks instead of a cut in interest rates. The move is China’s first rate cut in four years and many feel that the move may indicate that the industrial production data, which is due out Saturday, may show a larger economic slowdown in China than previously projected. According to Donna Kwok, economist for Greater China, in an e-mail sent to CNBC, “The discount that banks were previously allowed to offer on lending rates relative to the benchmark rate has been doubled, from 10 percent to 20 percent, which means that the lowest official lending rate has effectively been cut by 63 basis points, not just 25 basis points.”
Crude oil continued its run in the low $80 a barrel range this week, held down by perceived demand weakness in both Europe and Asia. The start of the summer driving season may help send prices higher soon, however.
The euro made an attempt to claw its way higher against the dollar this week, but Spain appears set to be a major headwind against it next week. The yen plunged against the dollar this week on poor Japanese economic data.
Friday to Friday Close
| June 1st | June 8th | Net Change | |
|---|---|---|---|
| Gold | $1620.00 | $1591.00 | (29.00) – 1.79% |
| Silver | $28.45 | $28.50 | 0.05 + 0.18% |
| Platinum | $1445.00 | $1425.00 | (20.00) – 1.38% |
| Palladium | $612.00 | $611.00 | (1.00) – 0.16% |
| Dow Jones | 12118.57 | 12480.52* | 361.95 + 2.99% |
Previous year Comparisons
| June 10th, 2011 | June 8th, 2012 | Net Change | |
|---|---|---|---|
| Gold | $1528.00 | $1591.00 | 63.00 + 4.12% |
| Silver | $36.32 | $28.50 | (7.82) – 21.53% |
| Platinum | $1830.00 | $1425.00 | (405.00) – 22.13% |
| Palladium | $815.00 | $611.00 | (204.00) – 25.03% |
| Dow Jones | 11951.91 | 12480.52* | 528.61 + 4.42% |
* Current at time of writing
Here are your Short Term Support and Resistance Levels for the upcoming week.
| Gold | Silver | |
|---|---|---|
| Support | 1580/1550/1530 | 28.00/27.60/27.20 |
| Resistance | 1600/1625/1640 | 29.00/29.50/30.00 |
| Platinum | Palladium | |
|---|---|---|
| Support | 1415/1400/1390 | 600/580/550 |
| Resistance | 1450/1500/1540 | 620/640/680 |
Volatility should be expected to continue and may increase dramatically if data out of Europe and China continues to disappoint. This weekend it is vitally important to monitor the news with China’s manufacturing, retail and inflation data due to be released and a widely expected announcement out of Europe regarding recapitalization of Spain’s troubled banking sector. According to Reuters, Five senior EU and German officials, speaking on condition of anonymity, said that deputy finance ministers from the single currency area would hold a conference call on Saturday morning to discuss a Spanish request for aid, but that no figure for the amount of assistance required has yet been decided on. The officials also said that following that conference call, the Eurozone’s seventeen finance ministers would hold a separate call to discuss approving the request and that “the announcement is expected for Saturday afternoon.” The European Commission’s spokesman on economic affairs said that Spain had made no request for aid and that he would not confirm that a conference call was planned for Saturday. The spokesman went on to say “If such a request were to be made, the instruments are there, ready to be used, in agreement with the guidelines agreed in the past.” Despite the denials, it is widely expected that the calls and accompanying announcement will take place this weekend to try to calm markets ahead of Greek elections on June 17th, the outcome of which is still totally uncertain. If the leftist, anti-bailout parties in Greece gain a decisive victory in the June 17th elections then the odds that Greece will exit the Eurozone will increase dramatically and European officials seem to be concerned that if there is no solution to Spain’s banking sector woes prior to that, panic may ensue. Elections take place this Sunday, and again on June 17th in France and it is widely expected that Francois Hollande may see his ability to rule reinforced if the left takes control of the lower house of National Assembly. Mr. Hollande has been widely critical of the austerity measures that are being forced on the peripheral Eurozone countries in exchange for bailout funds and the data coming out of Spain and Greece appear to be reinforcing his view that pro-growth policies would be more effective at boosting economic output in those countries than the severe austerity measures currently under way. In a sign of just how dysfunctional the stock market has become, stocks appeared to be set to post their best weekly gain for the year solely on the rumors out of Europe that the EU might agree to bail Spain’s banks out. Amid the backdrop of a slow-down in China, the very real possibility of a Greek exit from the euro, mounting debt and the looming US “Fiscal Cliff” that apparently even former president Bill Clinton even agrees is not being taken seriously enough by the US Congress, stock markets climb on the hope that Europe can print up some more money to bail out its fourth largest economy? That is sheer idiocy. The day may soon come, and Europe may just be the trigger that sets it off, when Central Banks simply can’t print enough money to paper over the debt woes of their respective nations. When that day arrives, paper money won’t even be worth the cost of the ink used to print it up and precious metals prices might be nothing short of astronomical. Pay close attention to the news this weekend and be prepared to act as we move into next week. 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 8th, 2012
Posted by Worldwide Precious Metals on Friday, June 8, 2012
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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