Highlights of the week of; August 12, 2013

GoldUp1US Stock Market Down

Dear PGM Capital Blog readers,

In this weekend’s blog edition, we want to discuss some of the most important events that happened in the global capital markets, the world economy and the world of money in the week of August 12th 2013.:

  • DOW drops 344.02 points or 2.23% in the week
  • Yield of the USA 10 year-note at 2-year high.
  • Gold, Silver, Platinum & Palladium breaking out on the upside.

DOW drops more than 300 points in the week
U.S. stocks fell for the week, giving the Dow Jones Industrial Average its biggest drop in a year, as company forecasts disappointed and economic data boosted speculation the Federal Reserve will reduce stimulus.

The Standard & Poor’s 500 Index (SPX) retreated 2.1 percent to 1,655.83, the largest weekly drop since June 21. The Dow slid 344.02 points, or 2.23 percent, to 15,081.47, its worst performance since June 2012. Both gauges slipped for the second straight week after reaching records on August 2nd 2013.

The DOW was down 4 of the 5 trading days during the week of August 12, for which it lost 344.02 points,  which brings it to its  first back-to-back weekly losses since late June of this year and its worst weekly decline this year.

Below chart gives an overview of the performance of the DOW last week

DOW week August 12 2013

Yield of the USA 10 year-note at 2 year high:
The embattled USA Treasury bond market took another heavy beating, last week sending benchmark yields to the highest level in more than two years.

The sell-off was driven by continued fears that the Federal Reserve may start cutting its bond buying as soon as next month. Worries that a major buyer of Treasury bonds would soon pull back have been the key driver of bond prices tumbling and yields soaring from a near-record low at the start of May.

The benchmark 10-year note’s yield touched 2.864% Friday, the highest level since July 29, 2011 as can be seen from below chart.

2-year chart 10-year-note

Gold, Silver, Platinum & Palladium breaking out on the upside
Global consumers aggressively ramped up purchases of physical gold in the April-June period, led by opportunistic buyers in emerging markets at a time when the precious metal suffered a record quarterly loss, the World Gold Council (WGC) said on Thursday.

Consumers around the world bought 53 percent more bullion in the second quarter from the year ago period, bringing total purchases of gold jewelry, bar and coins to 1,083.2 metric tons, according to WGC’s quarterly report on demand trends.  Last week gold broke out of its  key resistance level of US$ 1347.82  an ounce to close the week at US$ 1,376.12 an ounce as can be seen from below 30-day gold price history chart.

Gold_30_day_o_usd

Regarding silver, Indian silver imports are up a staggering 259 percent at 857 tonnes in the April-July time period. That amount is approximately one third of the global monthly production of silver.

Furthermore, July’s Indian silver import amount of 275 tonnes is the second highest import figure of any month in the last 5 years.

On top of this a silver vault that can hold 200 metric tons opened in Singapore last week to cater for increasing demand for physical precious metals among Asia’s wealthy, even as the commodity leads market declines this year. The new repository can hold US$128 million of silver at today’s prices.

The new facility is already 30 percent booked at the opening.

In the week of August 12, silver went through its US$ 22,00 as well as the US$ 22.90 resistance level to close the week at US$ 23.22 as can be seen from below 30-day silver price history chart.

Silver_30_day_o_usd

Platinum and Palladium also closed the week at a two-month high of respectively US$ 1,523 and US$ 762 an ounce, showing the price of Palladium flirting again with its 52-week high of US$ 781.00 an ounce.

See below charts for details.

Palladium 30 day chart

Platinum 30 days chart

PGM Capital Comments:
During the last two weeks we’ve seen for the first time in a very long time that gold, silver, platinum and palladium making higher lows and higher highs, which is a signal that prices of these precious metals are trending to the upside.

The same can be said for share prices of the world two biggest mining conglomerates, BHP Billiton (NYSE: BHP) and RIO-Tinto (NYSE: RIO), which are trading above their 50-day simple-moving-average and are in the process of crossing their 200-day moving-average to the upside, which can be seen as a very bullish sign for these stocks as well of the price of the commodities they are mining.

Below 30-day chart shows the price history of BHP Billiton as well as the one of RIO-Tinto together with their 50 and 200 day simple-moving average.

30 day chart BHP & RIO Tinto

Bullish trends in the prices of gold, silver and the stocks of world biggest and second biggest mining companies combined with increasing bond-yield can be seen as an early sign that (hyper)inflation is looming.

Regarding the USA markets, we’ve seen a brief correction of 3 to 5 percent off the recent highs and we would suspect the market to be choppy and sideways from here going into the next Fed meeting, of September 17 and 18 2013.

Before following any investing advice, always take your investment horizon and risk tolerance into consideration and keep in mind that the price of Gold, Silver and other precious metals as well as the stocks of their producers can be very volatile and that sharp corrections may happen in the short term.

Yours Sincerely

Eric Panneflek

 

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