PPMI Week in Review

October 19, 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. A series of disappointing earnings results, including a sizeable miss by tech giant Google,
worked to apply the brakes to the US stock markets this week.
2. Initial claims for unemployment in the US spiked higher this week by much more than
economists expected, perhaps justifying claims that last week’s drop to four year lows was a
result of manipulation of the data. The Labor Department is warning that data released over
the last two weeks appeared to be distorted by a change in the way one state was reporting its
claim figures.
3. The Philadelphia Fed manufacturing index, a measure of regional manufacturing activity,
rose in October for the first time following five months of negative readings. The index
moved to 5.7, compared to September’s -1.9. Any reading above zero indicates that manufacturing
activity is expanding. The sovereign debt issues that continue to plague Europe and
a sluggish economy in China may continue to put a drag on US manufacturing as a result of
declining exports.
4. Election season is in full swing with only 18 days until the US elections. Polls show a tight
race between Governor Romney and president Obama and the lack of a clear front-runner
continues to be a drag on markets as many investors appear to be taking the “wait and see”
approach. The US Congress still appears to be at a standstill as far as addressing the upcoming
“fiscal cliff” goes. Details continue to emerge on what the full effect of allowing the tax
cuts and other legislation to expire would mean to the US economy as well as the global financial
system as a whole. No matter which candidate wins the election, it may now be too
late for Congress to act to prevent the damage going over the “fiscal cliff” would cause.

5. Spain continues to hold out on formally asking for a bailout which would trigger bond buying
by the European Central Bank. Spanish Prime Minister Mariano Rajoy said, regarding
whether Spain would finally make the request, “The decision is not taken yet. What is important
is that if I need to take it, I will take it.” A finance ministers’ meeting that is due to
take place on November 12 may be the next potential window for deciding the fate of any
bailout for Spain, as well as further decision on Greece, which continues to struggle to implement
the conditions of its last bailout agreement.
6. US existing home sales dropped in September and there is another potential hammer blow to
the US housing industry on the horizon. Short sales, where banks agree to sell the home for
less than the outstanding value of the mortgage, have been outpacing foreclosures and helping
move the “shadow inventory” of distressed homes through the market. If the “fiscal
cliff” goes unaddressed, as nearly everyone suspects it will, there is a piece of legislation that
will expire along with it: the Mortgage Forgiveness Debt Relief Act and Debt Cancellation.
That Act made the amount of debt forgiveness from a short sale non-taxable. Expiration of
that Act means that short sales could come to a sudden halt as the tax burden on the seller
would simply be too great.
7. A group of hackers purportedly backed by Iran has claimed that they are responsible for the
recent series of “Denial of Service” type cyber-attacks against major banking institutions.
The group has stated that the attacks are in response to the anti-Islam film that has been used
as an excuse for so much violence in the Middle East and claims that the attacks will continue
until the film is removed from the Internet as a whole.
8. In a relatively quiet week, at least in regards to news out of the Middle East, crude oil maintained
its lower $90 a barrel price. Economic data out of China that met market expectations
helped support the price on hopes that demand in China might be better than previous projections.
9. The euro was climbing against the dollar during the first part of the week, but reversed
course Thursday and began dropping once again. The Japanese yen began dropping against
the dollar as Asia opened in the early morning hours Wednesday and continued its drop for
the rest of the week.
Friday to Friday Close
October 12th October 19th Net Change
Gold $1759.00 $1724.00 (35.00) – 1.99%
Silver $ 33.66 $ 32.10 (1.56) – 4.63%
Platinum $1655.00 $1613.00 (42.00) – 2.54%
Palladium $ 639.00 $ 623.00 (16.00) – 2.50%
Dow Jones 13328.85 13321.76* (7.09) – 0.05%

Previous year Comparisons
Oct 21st 2011 Oct 19th 2012 Net Change
Gold $1635.00 $1724.00 89.00 + 5.44%
Silver $ 31.20 $ 32.10 0.90 + 2.88%
Platinum $1500.00 $1613.00 113.00 + 7.53%
Palladium $ 618.00 $ 623.00 5.00 + 0.81%
Dow Jones 11808.79 13321.76* 1512.97 + 12.81%
*Current at time of writing
Here are your Short Term Support and Resistance Levels for the upcoming week.
Gold Silver
Support 1710/1700/1680 31.90/31.30/31.00
Resistance 1750/1775/1800 33.00/33.35/33.50
Platinum Palladium
Support 1600/1570/1550 620/600/580
Resistance 1640/1670/1700 640/660/700

 
Volatility should be expected to continue. The current selloff taking place in the stock markets
may result in an excellent buying opportunity in precious metals as the usual suspects use the
selloff as a smokescreen to manipulate the metals prices further. Egon von Greyerz, founder and
managing partner at Matterhorn Asset Management in Switzerland, said in an interview with
King World News this week “It’s ridiculous, Eric, what is happening now. There is an incredible
amount of intervention and manipulation (in the gold and silver markets). I know you’ve had
these superb interviews with the “London Trader”, but just looking at the screen, at every important
level, the gold and silver prices are being attacked and there is selling taking place. Every
time COMEX opens, it’s the same thing – you see selling. So there is clearly short-term manipulation,
but it makes no difference whatsoever. If you look at the gold price, in combination with
world liquidity, you see that gold is going up hand-in-hand with increased liquidity. That will
continue, Eric, and since the money printing will accelerate, it’s very clear the gold price will
also accelerate.” In a separate interview with King World News, John Embry of Sprott Asset
Management listed two factors at work on precious metals prices right now: “[Speaking of the
massive short position currently held by the bullion banks] They [the commercial bullion banks],
will move heaven and earth to protect this short position. As a result, I think we are going to battle
here. But the great news is, unlike the old days when they could really smash gold, this
physical demand is building up underneath the market, so the downside has been contained.”
Mr. Embry continued, saying “The other point here is the US election is coming up very shortly,
and the effort is to hold things up and make them look way better than they really are. The economic
numbers are being falsified. I think all markets of any significance are being rigged, but
none more so than gold. If gold exploded in price that would mean that everything else they are
reporting is exposed as being a lie. But once the election is behind us, I think there is going to be
a big move in gold. I would be very surprised if we aren’t comfortably at record highs well before
the year ends.” Europe continues to struggle under its increasing debt burden and there is no
apparent solution in sight. Spain continues to hold out on asking for an official bailout from the
EU, and without that formal request, no aid in the form of bond purchases by the ECB will be
forthcoming. In the US, there is a feeling that the tipping point has been reached in the “fiscal
cliff” debate. President Obama announced this week that he would veto any attempt to extend
the tax breaks and prevent the automatic budget cuts that are set to automatically kick in if his
demands for increasing taxes on the wealthy are not met. Even if Governor Romney manages to
win the election, he would not take office until January and there is little evidence that the animosity
being shown between the US Congress and the current administration would change as a
result of a Romney victory. Those wise investors who have not over-extended their ability to
remain in this market will easily weather this current round of precious metals price manipulation,
using it as an opportunity to purchase additional product for their portfolios since the longterm
outlook for precious metals remains unchanged. 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.

Advertisements
Leave a comment

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: