PPMI Week In Review

The Week in Review

1. 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.

2. 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.

3. 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.”

4. 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.”

5. 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.

6. 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

7. 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.

8. 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.

9. 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 $1628.20 $1567.00 (61.00) – 3.75%
Silver $ 28.75 $ 26.70 (2.05) – 7.13%
Platinum $1487.50 $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
Jun 24th 2011 Jun 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 antiinflationary
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.

Via Precious Metals International

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