PPMI Week in Review

The Week in Review

1. 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.

2. 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.

3. 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.

4. 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.”

5. 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.

6. 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.”

7. 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.

8. 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
Jun 3rd 2011 Jun 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%

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.

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