Silver Market Morning

Gold Today – After the bloodbath in New York yesterday gold closed at $1,564.50 down $40 as the search for a floor went down to a new recent low assisted by a two cents weaker euro. In Asia overnight the gold price did not really bounce but rose from close to $1,560 to $1,568 ahead of London’s opening. In London it was Fixed at $1,568.50 and in the euro at €1,189.339, while the euro was $1.3188. Ahead of New York’s opening, gold was $1,573.65 and in the euro at €1,193.52.

Silver Today – Silver closed at $28.48 down almost a dollar on yesterday in New York following the fear-led gold price. Ahead of New York’s opening silver stood at $28.74.

Gold _{(very short-term)}

We expect gold to bounce further, in New York today.

Silver _{(very short-term)}

We expect silver to bounce further, in New York today.

Price Drivers

Gold & Silver – Have gold & silver hit a bottom? This is a question that may be answered today or tomorrow. The reason for the fall in the precious metals was primarily the Technical picture with traders and speculators breaking support and causing prices to free fall to these current levels and the weaker euro.

Interpretations of the Fed Minutes were said to be the reason by some. However, stop loss triggering added to the impetus of the fall. In the last month the gold price has fallen nearly 10%. Irrespective of the fundamental picture, traders and speculators must be very happy with their profits on the short side and as the Technical picture has reached the target price on the downside, we do expect them to take profits soon. When fear runs a market like this a strong reaction is to be expected.

Our understanding of the Fed minutes is somewhat different to that of the media. We do not see a new position being contemplated by the Fed because the economy is turning up. We continue to see a flat to weak performance there. We do see that the Fed is worried about the pernicious impact of QE. There is a point where, if such money printing goes too far it will visibly weaken the buying power of the dollar without promoting growth. We ask, is, or will QE promote growth? If it is not then is deflation being hidden by QE? If this is what really is worrying the Fed, then the enormous damage to the economy of halting QE, as deflation really sets in, is the fear being expresses. This takes us back to August 2007, but with no QE to postpone damage and a considerably cheaper dollar ahead. The Fed needs a strong economy to allow it to unwind QE. We are nowhere near that! [Subscribe to our newsletters at www.GoldForecaster.com and www.SilverForecaster.com]

Silver –The silver price is moving down in reaction to the Fed minutes too and will follow gold now.

Regards,

Julian D.W. Phillips for the Gold & Silver Forecasters