All That Glitters


open 12,003.30

close 12,080.38 up 76.02

day high12,099.87

day low11,971.29

today’s volume 127,250,559

3mo avg. daily volume 166,653,114

Average P/E  13.4

1 year change +15.59%


open 5,147.51

close 5,201.22 up 42.67

day high 5,220.88

day low 5,141.43

today’s volume 15,604,888

3mo avg. daily volume 16,502,725

Average P/E  20.0

1 year change +17.31%

As a result of the Dodd-Frank Act enacted by US Congress, a new regulation prohibiting US residents from trading over the counter precious metals, including gold and silver, will go into effect on Friday, July 15, 2011.  
As a result, although the courts’ interpretation of Section 742(a) is unknown, Section 742(a) is likely to have a significantly negative impact on the OTC cash precious metals industry. Here too, it is essential that those who offer to be a counterparty to OTC metals transactions seek professional help to discuss possible operational and regulatory contingency plans.
The actual rule CLICK HERE; a transaction if it “results in actual delivery within 28 days or such other longer period as the Commission may determine by rule or regulation based upon the typical commercial practice in cash or spot markets for the commodity involved;” Alas, the commission has decided not to intervene and keep the exemption status window so small as to affect virtually all exchanges which transact in the gold and silver spot market.
(from the Zero Hedge Blog)

Eliminating the OTC markets on precious metals, and limiting purchases to those which can be delivered within 28 days should cause some minor panic movements in metals prices and OTC markets over the next few weeks.  Short term this should be very good for those looking at increasing positions in the tried-and-true physical positions in these markets as one would assume that sell-off’s over the next few weeks will hopefully bring pricing down on the metals market in general.  However, as it limits the exposure available in these markets, the long term outlook for physical product should prove enticing to those who understand the bigger picture.


The hottest topic these days is Greece.  With sovereign debt piling up and a European Union debating action, or in a less polite way of saying it, doing their best to shirk the Union’s responsibilities, buying Greek debt at 30% or so interest seems rather exciting.  However, with default an expectation, one should force themselves into positions of patience, waiting for the “pennies on the dollar” scenario that is likely to present itself.  The European Union may have gotten ahead of itself with all the additions over the years, extended past the strengths of England, France and Germany to those of lesser capable nations like Spain, Portugal, Ireland, Italy and Greece (what we call the PIIGS).  The question remains, does Greece eventually bow out gracefully or not?  The outspoken Merkel and her German counterparts will likely fall back on the wishes of their domestic constituency and leave the PIIGS for the slaughter.  We all would hate to see another Weimar Republic-esque downfall where neighboring countries are pouring into Greece, or Italy, or Spain searching for huge values, leaving the country bankrupt, and the purpose of the Union was to avoid these situations entirely, but when all else fails, Greece doesn’t keep Merkel in office, Germany does, so the political pandering will lean more towards the home-front.

International attention has been on this for, in my mind, one reason.  This is like allowing the opposing coach to watch your practice right before the Super Bowl.  The real game to come is the default of larger markets like larger portions within the Euro zone (ie Italy) and of course impending concerns over our own national debt here in the US.  How the IMF and European Union handle this situation will set precedent for coming incidents further down the line.


Options are limited these days.  After the down days posted last week and the HUGE volume of trades followed by a moderate rise today on average to down volume, one would deduce that the markets have lost their luster.  The average person may not be clawing their way past competition for hedge products like land, certain commodities and metals, but they are certainly using their money for mortgage payments and food instead of their brokerage accounts.  As the future becomes more clouded, we tend to adjust our eyes to something closer.  Why debate growth over the next 20 years when we’re busy making sure we’re fed over the next 20 days.  Bernanke will keep the system afloat through Quantitative Easing packages as long as the rest of the world will allow, but bailing water on a sinking ship doesn’t fix the hole, and over time that hold will get bigger.  The markets are speaking for themselves, the only thing that has shown real growth in recent years in unemployment figures.  Deflation may be a bullet in the head, but our current inflationary problem is one in the stomach, and the end result will be the same.


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