Silver Market Morning

Gold Today –New York closed at $1,252.70 up $20.50 on yesterday. Asian demand came in and continued to lift gold to $1,264.4. It was Fixed in London at $1,260.75 and in the euro at €967.946 up €15, while the dollar against the euro was at €1: $1.3025. Ahead of New York’s opening gold stood at $1,255.40 and in the euro at €965.77.

Silver Today – Silver closed at $19.60 down 2 cents in New York yesterday. Ahead of New York’s opening silver stood higher at $19.63.

Gold _{(very short-term)}

We expect a volatile gold price with a weaker bias, in New York today.

Silver _{(very short-term)}

We expect a volatile silver price with a weaker bias, in New York today.

Price Drivers

Gold & Silver – There were sales of 1.221 tonnes from the SPDR gold ETF yesterday, but this was insufficient to restrain the gold price. We repeat that we need to see quite a few days of no sales before we can be certain that sales from the SPDR gold ETF will not hurt the gold price. The gold price is now just under resistance. Gold sales from this fund in the U.S. remains the main influence of the gold and silver price currently and are accounting for the current volatility in both prices. On days where over 3 tonnes of gold or more are sold from the fund prices tumble. On days where no sales are seen prices rise and quickly. We expect this to be the case for the next week or so.

While the $: € exchange rate is moving between $1.3 and $1.32 market talk is that the dollar will be strong going forward. Currencies, at the moment are confusing, insofar as they are still seeking competitive advantages by falling against the dollar and the euro. They no longer reflect the Balance of Payments position of the country. Add to this the continuation of the unwinding by the “carry trade” because of rising yields in the U.S. and you have a somewhat distorted picture that will continue to see a ‘stronger’ dollar. But this is not strength insofar as it means rising confidence. There are several impending financial crises we are now close to that will undermine confidence in not just the U.S. dollar but the monetary system itself. Foremost of these is the coming crisis from rising interest rates themselves. After weakening exchange rates come higher interest rates in the economies affected. In the U.S. the recovery itself will be undermined unless the rises are halted. Then comes potential sales of Treasuries by foreign investors so as to retain current cash values. This will in turn lift yields throughout the fixed interest markets. Choking off the recovery is the biggest of the Fed’s worries now. [Subscribe to our newsletters at www.GoldForecaster.com and www.SilverForecaster.com]

The yield on 10-year Treasury notes is expected to rise to 2.75% by year’s end from today's 2.46%, with a further increase to 3.25% by next June. This could translate into 10-year Treasuries dropping 25% in price.

Silver – The silver price is now steady while gold prices continue to rise. It is as though investors in silver are reading gold as in consolidation mode and are waiting for the next strong move in gold.

Regards,

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