Silver Market Morning

Gold Today –New York closed at $1,278.50 down $72.50 on Thursday. Asia took the price back up to $1,300 ahead of London’s opening. In London fell below $1,300 and was Fixed at $1,290.25 down $13 and in the euro at €976.28 down €10.06 while the dollar was slightly stronger against the euro at €1: $1.3216. Ahead of New York’s opening gold stood at $1,294.60 and in the euro at €979.42.

Silver Today – Silver closed at $21.34 down 27 cents in New York on Wednesday. Ahead of New York’s opening silver stood higher at $19.83.

Gold _{(very short-term)}

We expect the gold price to consolidate below $1,300, in New York today.

Silver _{(very short-term)}

We expect the silver price to consolidate below $20, in New York today.

Price Drivers

Gold & Silver – Yesterday saw the SPDR gold ETF sell 4.21 tonnes of gold leaving the fund holding 995.352 tonnes. All financial markets took a heavy blow yesterday not heeding the time frame the Fed said it would take to taper off QE, but discounting it as if it were starting to do it today. In effect global markets are now discounting deflation, as if interest rates were going to rise to the extent that they will choke off growth. It seems that Chairman Bernanke’s statements were trying to warn that this would not happen. But markets are volatile and emotional and wanted to run to the conclusion before the story was told. If they continue in this vein, deflation will arrive and fast. The market’s pattern of behaviour is similar to the second half of 2007 when the credit crunch first struck. [Subscribe to our newsletters at www.GoldForecaster.com and www.SilverForecaster.com] The reason the Fed made the statement it did was aimed at encouraging a more positive attitude towards the overall economy, but the impact misfired. The next step of the Fed will have to be to wait to see if the market’s reaction was just a flash in the pan, or whether fear has returned to financial markets. If this is the case they will have to increase QE to counter deflation.

The fall in the gold price was not backed up by heavy selling of gold, indeed the 4 tonnes sold from the SPDR gold ETF was not sufficient to cause a $70 drop in the price. With this in mind the eyes of gold investors are looking across to Asia, but gold investors across the globe are holding back right now to see if the fall is over. The technical picture is still looking down, but it appears that the physical sales of gold are winding down.

Silver – The silver market has taken a battering, but we do not see it moving separately from gold. It will continue to reflect, pretty closely, the behavior of gold. However, with industrial [medical in particular] demand in the ‘need’ as opposed to ‘want’ category, silver fundamentals do not justify the large falls we have seen. Investment demand for physical silver remains strong.

Regards,

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