PRECIOUS METALS REVIEW - FEBRUARY 3, 2012

In the precious metals markets this week . . . 

GOLD:
Monex spot gold prices opened the week at $1,728 . . . traded as high as $1,762 on Friday and as low as $1,725 on Monday . . . and the Monex AM settlement price on Friday was $1,738, up $10 for the week.  Gold support is now anticipated at $1,727, then $1,697, and then $1,664 . . . with resistance anticipated at $1,767, then $1,791, and then $1,804.

SILVER:
Monex spot silver prices opened the week at $33.40 . . . traded as high as $34.32 on Friday and as low as $32.93 on Tuesday . . . and the Monex AM settlement price on Friday was $33.67, up $.27 for the week.  Silver support is now anticipated at $33.27, then $32.70, and then $31.50 . . . and resistance anticipated at $34.13, then $34.75, and then $35.35.

PLATINUM:
Monex spot platinum prices opened the week at $1,612 . . . traded as high as $1,633 on  Friday and as low as $1,586 on Tuesday . . . and the Monex AM settlement price on Friday was $1,628, up $16 for the week.  Platinum support is now anticipated at $1,615, then $1,548 and then $1,498 . . . and resistance anticipated at $1,637, then $1,676, and then $1,719.

PALLADIUM:
Monex spot palladium prices opened the week at $686 . . . traded as high as $711 on Friday and as low as $684 on Tuesday . . . and the Monex AM settlement price on Friday was $709, up $23 for the week.  Palladium support is now anticipated at $707, then $648, and then $614 . . . and resistance anticipated at $733, then $784, and then $830.

QUOTES OF THE WEEK:

From Gordon G. Chang, in a posting on the Forbes website on January 29th:

''This month, the Hong Kong Census and Statistics Department reported that China imported 102,779 kilograms of gold from Hong Kong in November, an increase from October's 86,299 kilograms.  Beijing does not release gold trade figures, so for this and other reasons the Hong Kong numbers are considered the best indication of China's gold imports.

Analysts believe China bought as much as 490 tons of gold in 2011, double the estimated 245 tons in 2010.  'The thing that's caught people's minds is the massive increase in Chinese buying,' remarked Ross Norman of Sharps Pixley, a London gold brokerage, this month.

So who in China is buying all this gold?

The People's Bank of China, the central bank, has been hinting that it is purchasing.  'No asset is safe now,' said the PBOC's Zhang Jianhua at the end of last month.  'The only choice to hedge risks is to hold hard currency -- gold.'  He also said it was smart strategy to buy on market dips.  Analysts naturally jumped on his comment as proof that China, the world's fifth-largest holder of the metal, is in the market for more.''

''Apart from China's central bank, there is not much demand from the country's institutional investors for gold.  There are industrial users, of course, but their demand is filled from domestic production --  China is the world's largest gold producer.  Most of China's gold demand from foreign sources, therefore, is from individuals.''

. . . and from Congressman Ron Paul, in his weekly ''Texas Straight Talk'' column on his House of Representatives website, posted on January 30th:

''The Federal Reserve's interest rate price-setting board, the FOMC, met last week.  They will continue to set the federal funds rate at well below 1%, and plan to keep it low until the end of 2014.  That's a year and half longer than they planned when they met just last month.  Chairman Bernanke says they are keeping interest rates so low for so long because the economic outlook warrants it.

The fallacies in their reasoning would be amusing if they weren't so dangerous.  The Fed wants to keep the price of money at essentially zero -- in other words 'free' -- to boost the economy.  But the boost they are attempting won't get here for another three years.  That's not a recovery.  And we've already tried this tactic.  That's how we got into this mess in the first place: with interest rates artificially low for a very long time.  Free money doesn't stimulate growth, as Japan's two lost decades clearly show.  Artificially low interest rates only serve to punish saving, distort market signals, and cause further malinvestment.  They also do nothing to address the only real solution to our economic woes: liquidation of the bad debt that hangs around the neck of the world's economy, preventing recovery.  Artificially low interest rates merely ensure that we remain a debt-financed consumer economy guaranteed to end up with a weaker economy and higher prices.''

. . . and from Kristina Peterson and Damian Paletta, in an article posted on the Wall Street Journal website on January 31st:

''The federal budget deficit likely will top $1 trillion for the fourth consecutive year in fiscal 2012 as the economy continues to grow at a sluggish pace, the nonpartisan Congressional Budget Office predicted Tuesday.

Congress's official budget scorekeeper projected a sober outlook in its semi-annual report Tuesday, forecasting that the unemployment rate will remain above 8% both this year and next year and above 7% until 2015.  The economy will see a 'continued slow recovery' as real gross domestic product grows 2% this year, measured from the fourth quarter of the previous calendar year, and by 1.1% next year.''

''The deficit is expected to drop as revenues increase, particularly from the scheduled expiration of the Bush-era tax cuts and other tax provisions that recently expired or are scheduled to do so at the end of the year.  Alternatively, if tax cuts are continued, if reimbursements to doctors for treating Medicare patients are held at current levels and if Congress prevents automatic spending restrictions from going into effect, the deficit would average 5.4% of GDP between 2013 and 2022.

The CBO said it lowered its projection for economic growth and raised its estimate for the near-term unemployment rate because of a fiscal shock next year caused by steep spending cuts and higher taxes that are scheduled to go into place at the end of 2012.''

. . . and from Greg Robb, in a posting on the MarketWatch website on February 2nd:

''Federal Reserve Board Chairman Ben Bernanke once again urged Congress to put U.S. fiscal policy on a sustainable path, warning Thursday that the nation risks the possibility of a sudden fiscal crisis unless action is taken.  'Although historical experience and economic theory do no indicate the exact threshold at which the perceived risks associated with the U.S. public debt would increase markedly, we can be sure that, without corrective action, our fiscal trajectory will move the nation ever closer to that point,' Bernanke said in testimony prepared for delivery to the House Budget Committee.  The Fed chairman said that Congress should also 'take care' not to impede the current economic recovery.  He said these two goals were fully compatible.'' 

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