GBR Market Wrap: A Tough Few Months for Precious Metals

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In this Week’s Issue: December 16, 2011

Weekly Snapshot
• The Italian two-year yield is down to 5.29% – the 10-year yield is at 6.59%.
• The Spanish two-year yield is down to 3.46% – the 10-year yield is down to 5.31%.
• The Euro fell below 1.3000 vs US$ but recovered to close at 1.3045 on Friday
• U.S. initial jobless claims fall to 366,000, the smallest number since May ’08
• Euro area annual inflation was 3.0% in November unchanged compared with October
• U.S. CPI increased 3.4% over the last 12 months before seasonal adjustment
• U.S. current account deficit decreased to $110.3 billion or 2.9% of GDP Q3 of 2011
• U.S. industrial production decreased 0.2% in November versus +0.7% in October
• OPEC ministers likely to keep oil production steady at 30M barrels a day
• IFO cut forecast for Germany, projecting GDP of +3% in 2011 and only +0.4% in 2012
• U.S. retail sales were $399.3 bn, up 0.2% from October and up 6.7% from one year ago

Market Barometers

2011-12-16 stocksfx 2011-12-16

Weekly Chart
2011 has been a bumpy year for stock investors. In the U.S. the punters will be happy if they can break even for the year. Yet, if you feel U.S. markets have been volatile, think again. Most emerging markets have had an even tougher year. Investors in China probably won’t be too happy with the Shanghai Stock Index currently down over 20 percent for the year. But that pales in comparison to the parabolic rise and fall of Chinese stocks since 2006. The rise and fall was so dramatic that you can actually fit the shape of an Eiffel tower into the chart (see below).

Shanghai Eiffel

Given these wild price swings, we should feel relatively safer investing in U.S. stocks. The direct comparison of Chinese equities with the S&P 500 makes the impact of the credit crisis on our turf look like a lame duck event. So then, are we better off investing in U.S. markets? Since 2006 Chinese equities are still up about 80 percent while U.S. stocks barely broke even. You may have lost your sanity along the way but if you had the courage to hold on, 80 percent over a five-year period isn’t all that shabby.

Shanghai Composite

Precious Metals, a quasi religion?
Precious Metals have had a difficult few months. Gold is off 16 percent from its high, silver almost 40 percent down from the record high established in May of this year. But things aren’t just difficult for gold and silver, Mark Dow predicts more head wind ahead for 2012. Please consider: Another Grim Year for 2012–Even For Commodities.

Good luck and good investing!


Clemens Kownatzki, MBA is an adjunct professor of financial risk management at the Graziadio School of Business and Management, as well as the founder and CEO of FX Investment Strategies, a Registered Investment Advisor. In addition to running his investment advisory firm, he is a contributing author at SeekingAlpha.com and BusinessInsider.com. He also authored the book, Money Music 101, available on Amazon and Kindle, in addition to publishing the popular investment blog www.fxinvestmentstrategies.com along with a weekly newsletter.Disclaimer

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Author of the article
Clemens Kownatzki, MBA
Clemens Kownatzki, MBA
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