PPMI Week In Review

September 21, 2012
“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.
The Week in Review
1. “I think everyone should own gold everyone should own silver. To me, it is the true buy-andhold
asset right now.” Those are the words of Joe Terranova, on CNBC’s “Fast Money”
show Wednesday evening. QE to infinity appears to have set the stage for massive rallies in
precious metals prices and all indications are that this is only the beginning.
2. Mohamed El-Erian, CEO of bond giant PIMCO, in discussing the US Federal Reserve’s QE
to infinity policy with CNBC this week said “Not only will they tolerate higher inflation, not
only will they wish for higher inflation, but they actually may target higher inflation.” El-
Erian continued in his “Squawk Box” interview, saying “This is true for all central banks –
the ECB, the Fed, the Bank of Japan, the Bank of England. We are so deep into unfamiliar
territory, so deep into experimental mode, that we don’t know what the consequences will be.
Whoever comes afterward will have to clean up the mess.”
3. The unemployment picture in the US remains one of stagnation. A decline of 3,000 claims
was announced for last week, but the prior week’s figures were revised upwards by 3,000
claims. The four week moving average, considered to be a much better data point on the
status of the jobs market, climbed higher by another 2,000 claims.
4. Anti-America protests continue around the world in response to a poorly made and privately
produced anti-Islam film. The Pakistani government had apparently set aside Friday as a
holiday so that people could protest against the video, but at least one such demonstration
became fatal when police opened fire on protesters who were setting fire to a movie theater.
At least one bystander was killed in the incident, bringing the death toll up to at least 31 people,
including the Americans killed in the initial attacks. Countries were bracing for addi-
tional protests and potential attacks after Friday prayers. Cartoons mocking Islam published
in a French magazine on Wednesday were expected to exacerbate the problems.
5. In Asia, tensions flared between China and Japan over Japan’s nationalization of islands in
the China Sea. The islands, called the Senkakus by the Japanese, have long been a source of
dispute between the two countries and Japan’s purchase of the islands from a private individual
sparked a series of violent anti-Japanese protests in China this week. The US went to
great lengths to point out this week that the islands were covered under a 1960 security treaty
between Japan and the US.
6. Only marginally mentioned in the news Thursday, US Federal Energy Regulatory Commission
threatened to suspend JPMorgan Chase’s right to sell electricity into the energy market
at market-based rates. If the suspension goes forward, JPMorgan would be forced to sell
power at or below cost. The FERC said that JPMorgan submitted misleading information or
omitted facts completely in its dealings with the commission on at least four occasions over
the last 11 months. The California System Operator Corporation alleges that JPMorgan may
have pushed the price of electricity in California and the Midwest up by roughly $73 million.
7. Spain is reportedly in discussions with European Union authorities over terms of additional
reforms that would be required in order for Spain to secure a bailout. Details will be supposedly
unveiled next Thursday, just prior to the announcement of the results of the three month
review that has been ongoing to determine exactly how much European Stability Mechanism
funds will be needed to recapitalize the crippled Spanish banking system. Disappointing
economic data across the Eurozone as a whole continued to put a drag on economist’s recovery
projections for the region.
8. Crude oil had a rough week this week, broaching a renewed discussion on high frequency
trading as it dropped $4 in minutes. Announcements later in the week that inventory rose and
that Saudi Arabia intended to increase supply helped to push oil prices back into the low $90
a barrel range.
9. The euro dropped against the dollar again this week amid rumors that European Union
authorities were in discussions over a bailout plan for Spain. The Japanese yen drifted lower
for most of the week, but reversed course Thursday after the Bank of Japan announced it was
embarking on its own round of quantitative easing.
Friday to Friday Close
September 14th September 21st Net Change
Gold $1772.00 $1778.00 6.00 + 0.34%
Silver $ 34.65 $ 34.60 (0.05) – 0.14%
Platinum $1715.00 $1635.00 (80.00) – 4.66%
Palladium $ 695.00 $ 670.00 (25.00) – 3.60%
Dow Jones 13593.37 13607.68* 14.31 + 0.11%

Previous year Comparisons
Sep 23rd 2011 Sep 21st 2012 Net Change
Gold $1659.00 $1778.00 119.00 + 7.17%
Silver $ 31.02 $ 34.60 3.58 + 11.54%
Platinum $1617.40 $1635.00 17.60 + 1.09%
Palladium $ 635.75 $ 670.00 34.25 + 5.39%
Dow Jones 10771.48 13607.68* 2836.20 + 26.33%
*Current at time of writing
Here are your Short Term Support and Resistance Levels for the upcoming week.
Gold Silver
Support 1750/1725/1700 34.40/34.00/33.75
Resistance 1790/1800/1820 35.00/35.25/36.00
Platinum Palladium
Support 1620/1600/1575 660/640/625
Resistance 1650/1690/1700 680/700/725
Volatility should be expected to continue. Mainstream media has coined a new phrase: “QEfinity,
and beyond!” regarding the US Federal Reserve’s new round of open-ended quantitative
easing. The ramifications of the program are now starting to be picked apart and discussed
openly, and the same terms keep showing up in each of the discussions that take place: Gold and
Silver. The race to debase fiat currencies has begun in earnest now, the Bank of Japan announced
its own QE program shortly after the US Federal Reserve announced theirs, and Brazilian
finance minister Guido Mantega told the Financial Times on Thursday “Japanese companies
were complaining about their strong exchange rate. If a weaker dollar leads to rising trade competition,
then that will also force Brazil to adopt measures to stop the real strengthening.” Keith
Barron, a consultant and gold mining entrepreneur, told King World News this week “I don’t
think they can ever stop printing money now. They are down the road of no return. I’ve seen
this happen in Russia. I’ve seen it happen in Brazil. I lived in Brazil and saw it happen twice.
The currency went to zero.” Mr. Barron continued, saying “The whole world is in an incredible
slump. The only way they can get out of this is by printing tremendous amounts of money, and
producing a lot of liquidity. Bernanke has said publicly that he knows when to turn the faucet
off, and it’s not going to produce inflation. I don’t think he’s that clever. You can go back
through 100 years of monetary history, and see that other people who thought they were clever
like Bernanke, turned out not to be. It resulted in things like the Weimar inflation in Germany.
We’re headed down that path. It is extremely bullish for precious metals. This is why we’ve
seen gold and silver react so strongly to the Bernanke news.

 

 

The only way they can stop this
now is by shutting the door and bringing out a new currency.” Ben Davies, CEO of Hinde Capital
told King World News on Thursday “The ECB, even in this last meeting, has effectively reduced
its criteria again on collateral. They are effectively saying, ‘We’ll take everything, including
the kitchen sink into the ECB, if it allows us to backstop the system’. So in that situation,
collateral is running out. We noticed this also in the US. Smaller banks are now allowed to have
gold as a zero risk-weighted provision. I think that’s a tacit admission that gold is the only really
remaining collateral at this point, and people realize the only volatility in gold is primarily driven
around currencies.” Davies continued, saying “I think September 12th might well have marked
the day the world embarked on serial debasement of the reserve currency, and set the train in motion
for a really gigantic move in gold over the next five years. There is no limit to the price.”
Owning physical precious metals in this environment is being touted by analysts as “a vital way
to protect and diversify your portfolio” and the rush to accumulate physical product appears to be
underway by wise investors across the globe. As the global financial crisis evolves, opportunities
to buy on price dips may become few and far between. One analyst on CNBC, discussing silver,
said he would “buy here, and buy higher” in the current environment. 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.

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