Silver Market Morning

Gold Today – Gold closed in New York at $1,575.30 down $23 on yesterday. In Asia and London it traded lower down to $1,568 ahead of the Fix in London which was set at $1,568.50 and in the euro at €1,222.81, while the euro was at €1: $1.2827. Ahead of New York’s opening it traded at $1,571.65 and in the euro at €1,226.41.

Silver Today – Silver closed at $27.25 down 75 cents another 1% on yesterday, in New York. Ahead of New York’s opening silver stood at $27.25.

Gold _{(very short-term)}

Gold will consolidate lower just above long-term support, in New York today.

Silver _{(very short-term)}

Silver will consolidate on long-term support at $27, in New York today.

Price Drivers

Gold & Silver – 13.78 tonnes of gold was sold out of the SPDR gold Exchange Traded Fund yesterday. We are of the opinion that traders and speculators were successful in their attack on the gold price, triggering sales from the fund, which together caused the gold price to fall over $30 yesterday. The SPDR gold sales are very important to the gold price currently, because they are having a large impact on the gold price. The recent rise back to the $1,600 level was due to these sales stopping and an uptick in buying of these shares. However, the portion of these shares that is traded is limited, leaving long-term core holders the crux of the fund. Once trading sales halt, then the balance of demand and supply outside that pushes the gold price higher. Traders and speculators continue to hold a disproportionate hold over the short-term gold and silver prices.

The question the gold market now has to find an answer to is, “Will the gold price’s long-term support at $1,560 hold?” Will we see Asian bargain hunters move into the market and central banks take gold off the market?

The euro is struggling to hold up in the face of poor Eurozone numbers and the growing danger of Spain’s debt to GDP ratio degenerating. Contagion from Cyprus into Spain is a real danger now. Meanwhile the U.S. appears to be getting more comfortable with its economic recovery as the housing market continues to improve. Questions do remain about the real quality of the recovery. Will the housing market hold up if interest rates rise? What will happen to the bond market if interest rates take off? These are critical questions, but ones that will not become imperative until the recovery is further down the road than at present.

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Silver – Silver remains sensitive to the downside.

Regards,

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