PPMI Week In Review

The Week in Review via PMI Limited

1. 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.

2. 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.”

3. 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.

4. 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.

5. 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.

6. 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.”

7. 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.

8. 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.

9. 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 to June 15th
Net Change
Gold $1591.20 $1628.00 37.00 + 2.33%
Silver $ 28.50 $ 28.75 0.25 + 0.88%
Platinum $1425.50 $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
Jun 17th
2011 Jun 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 longterm 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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