Silver Market Morning

Gold Today –New York closed at $1,383.70 on Monday. Asia took the price to $1,378.45 ahead of London’s opening. In London it was Fixed at $1,378.50 down $7.50 and in the euro at €1,030.346 down €5.20 while the euro was slightly stronger against the dollar at €1: $1.3379. Ahead of New York’s opening gold stood at $1,378.40 and in the euro at €1,030.50.

Silver Today – Silver closed at $21.83, up 8 cents in New York on Monday. Ahead of New York’s opening silver stood higher at $21.80.

Gold _{(very short-term)}

We expect gold to consolidate around current levels again, in New York today.

Silver _{(very short-term)}

We expect silver to consolidate at current levels again, in New York today.

Price Drivers

Gold & Silver – So far this week the SPDR gold ETF has fallen only 0.365 of a tonne. However its presence is keeping the gold price down. But the consolidation process in the short-term is coming to an end as the trading range tightens. We do expect to see a strong move this week, but which direction remains to be seen.

With U.S. investors reading the gold price as counter to the state of the U.S. economy all eyes are turned to the Fed’s statements tomorrow as their two-day meeting commences today. The markets want to see positive news and because of that want to hear that the Fed will begin to taper its QE program. Our expectation is that Mr Bernanke is wary of giving such an indication because markets will run ahead of themselves and begin to sell Treasuries down, raise interest rates and stall the recovery. So we expect him to indicate little change until the New Year at the earliest. It is true that the housing market recovery has gained traction and house prices are rising, but the Fed needs a broad-based recovery that can take the strain of higher interest rates, including on mortgages.

To us a feature that has the most significance for the gold price is not the U.S. economy, but the ability of U.S. investors to push the gold price lower in the future. The available stocks of gold in the U.S. for this purpose are with the leading banks, particularly JP Morgan Chase and Merrill Lynch and hedge funds. Add to this the holdings of the SPDR gold ETF. We believe the stocks held for the very long-term and not for the purpose of short-term profit form perhaps the core of the current balance of 1,000 tonnes [of the SPDR fund], more or less. Short-term profit positions are close to exhaustion. The stocks held by the banks and in COMEX warehouses are at very low levels. If we are correct in these assumptions, then the ability of U.S. investors to push gold prices lower is very limited. If we are correct, then when data giving good news on the U.S. economy, or statements indicating that a tapering of QE is closer than we think, the gold price will not fall heavily. Thereafter the main driver of the gold price will have shifted to Asia. [Subscribe to our newsletters at www.GoldForecaster.com and www.SilverForecaster.com] We wait to see!

Silver – Silver’s is still marking time waiting for a clear direction from the gold price.

Regards,

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