PPMI Week In Review

“The following text is taken from Precious Metals International, LTD’s weekly memo titled “The Week in Review”.
The text is duplicated here as a courtesy to you, our customer, and is not intended as a solicitation to buy or sell. The
original memo can be viewed at pmilimited.com and a new one is released every Friday.

July 13, 2012

The Week in Review

1. The fundamentals supporting precious metals prices appear to be growing even stronger.
This week’s data dump from multiple countries generated a media “spin” frenzy as media
outlets struggled to put a positive spin on the state of the struggling global economy.

2. The scandal surrounding the fixing of the London interbank offer rate (Libor) continues to
expand and shows signs that it may spill over into other interbank offer rates. 16 banks were
involved in setting the Libor rate during the period of time under scrutiny and at least 12 of
those are under investigations by various regulatory bodies. The lawsuits have already begun
to pile up and the projections of the costs of both regulatory penalties and fines and damages
to investors and counterparties may approach $22 billion according to estimates by Morgan
Stanley.

3. Initial claims for unemployment in the US hit their lowest number in four years, but many
believe the data may be skewed due to the July 4th holiday in the middle of the week. The
initial reading for July of the Thomson Reuters/University of Michigan’s Consumer Sentiment
index hit its lowest level in 7 months.

4. And yet another Wall Street scandal hits the press. Peregrine Financial Group filed for bankruptcy
on Tuesday, following the discovery of an apparent suicide attempt of its founder and
CEO Russell Wasendorf on Monday. Regulators say that as much as $200 million in customer
funds are unaccounted for so far. This is yet another black eye for the CFTC and when
combined with the mounting pressure of all the scandals that broke last week in regards to
Libor and JPMorgan’s alleged activities in manipulating the Energy market, may finally force
some action out of the besmirched regulatory body.

5. The Federal Reserve released the minutes of their latest FOMC meeting and it was virtually a
carbon copy of its previous meetings, disappointing the stock markets with its lack of mention
of additional quantitative easing measures once again. The Fed, of course, continues to
stand ready to implement additional monetary easing if required.

6. China’s GDP growth rate hit its slowest pace in three years in the second quarter according to
official data released this week. Economists were grasping at straws to try to paint a picture
of coming strength in the coming months, ignoring the official numbers and citing their own
analysis of loan growth, power output and oil demand instead.

7. Oddly, following a Moody’s downgrade of Italy’s rating to just two notches above junk
status, Italy’s three year borrowing costs fell, dropping below 5%. Moody’s said, regarding
current reform measures underway in the country, “The negative outlook reflects our view
that risks to implementing these reforms remain substantial. Adding to them is the deteriorating
macroeconomic environment, which increases austerity and reform fatigue among the
population. The political climate, particularly as the spring 2013 elections draw near, is also
a source of implementation risk.”

8. According to RealtyTrac, banks are moving delinquent loans into foreclosure proceedings at
a faster pace. The increase in supply of distressed homes hitting the market may trigger another
decline in home prices just as analysts were beginning to see glimmers that prices may
have finally bottomed.

9. Crude oil was solidly in the middle $80 a barrel range again on Friday. Announcement of
increased sanctions against Iran by the US, and Iran’s threat to shut down the Straits of Hormuz
if the sanctions continue are helping to support oil prices even as the global economy
continues to show signs of slowing further.

10. The euro continued its drop against the dollar, sinking to two year lows as the Eurozone continues
to struggle under its sovereign debt woes. The Japanese yen edged higher against the
dollar this week.

Friday to Friday Close
June 6th July 13th Net Change
Gold $1580.20 $1592.00 12.00 + 0.76%
Silver $ 27.00 $ 27.35 0.35 + 1.30%
Platinum $1445.00 $1430.00 (15.00) – 1.04%
Palladium $ 578.00 $ 585.00 7.00 + 1.21%
Dow Jones 12772.47 12680.25* (92.22) – 0.72%

Previous year Comparisons
July 15th 2011 July 13th 2012 Net Change
Gold $1525.00 $1580.00 67.00 + 4.39%
Silver $ 35.40 $ 27.00 (8.05) – 22.74%
Platinum $1775.00 $1445.00 (345.00) – 19.44%
Palladium $ 775.00 $ 578.00 (190.00) – 24.52%
Dow Jones 12479.73 12680.25* 200.52 + 1.61%
* Current at time of writing

Here are your Short Term Support and Resistance Levels for the upcoming week.
Gold Silver
Support 1570/1550/1530 27.00/26.50/26.10
Resistance 1600/1625/1650 27.60/27.90/28.50
Platinum Palladium
Support 1420/1400/1375 570/550/525
Resistance 1440/1460/1500 590/610/640

Volatility should be expected to continue as the global economy continues to show signs of slowing.
Precious metals have survived yet another takedown attempt this week, and the fundamentals
supporting a coming explosion to the upside appear to have grown even stronger. Europe
continues to struggle under its massive debt burden, and there still seems to be no feasible plan to
resolve the situation. In a report issued by Goldman Sachs on Friday, the firm noted that the current
100 billion euro aid package expected to see final agreement in late July, may not be enough
to salvage the crippled Spanish banking system and that more measures may be needed. China’s
economy still appears to be slowing, despite analyst’s attempts to make the statistics show otherwise.
In the United States, housing may be in for another downturn as distressed properties
flow into the market again driving prices down. In perhaps a sign of just how desperate the
housing situation in the US has become, San Bernardino County, in California, apparently began
exploring the legality of using eminent domain to seize underwater mortgages and write down
their principal values. The effects of this would be massive and far reaching, as it would almost
certainly affect the values of the very Mortgage Backed Securities that, due to their incorrect
valuation, triggered the initial financial crisis in the first place. The scandals surrounding financial
institutions across the globe may finally, and sadly, force the CFTC to act on the precious
metals manipulation accusations they have been receiving for years. Ned Naylor-Leyland, investment
director at Cheviot, told CNBC on Thursday that the Libor scandal may have opened
markets up to “more scrutiny and more investigation.” Naylor-Leyland said he expects to see
revelations over the next few months that the price of gold was also manipulated because “gold
and silver reflect the true value of money the same way interest rates do.” Naylor-Leland continued,
saying “It is effectively an intervention in two ways; one would be the fact that for central
banks, gold and silver going up doesn’t make their currency look any good, and secondly, a
number of the big commercial banks have very large short positions which they like to manage
and make easy money from.” JP Morgan, long the chief “big bank” accused of accumulating
massive short positions in the silver market which they then use to manipulate the price to their
advantage, is now under several different investigations for other manipulation schemes. JP
Morgan has been implicated in the Libor scandal, is apparently under investigation for manipulation
of the energy market, and the US Congress has been scrutinizing their activity since details
of the failed “London Whale” trade emerged. As scandal after scandal emerges, most having
taken place right under the noses of the very regulators that were supposed to have been monitoring
these firms, calls for action and penalties are growing increasingly louder. Drought conditions
across the agricultural areas of the US are beginning to show signs of pushing food prices
higher. Even Italy has reported that weather conditions there may severely impact grapes and
therefore curtail wine production there this year. Despite the fact that so called “volatile” food
and energy costs are stripped out of official inflation figures, spiking global food costs may well
be the first sign of impending inflation as the monetary printing presses across the globe continue
whirring. Precious metals may well skyrocket in those circumstances. 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.

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