Silver Market Morning

Gold Today –New York closed on Tuesday at $1,292.40 up $7.40. This morning, in Asia, it slipped back to $1,286. In London it held steady before being Fixed at $1,284.25 and in the euro at €977.29. Ahead of New York’s opening gold was trying to go firmer trading at $1,287.30 and in the euro at €979.643.

Silver Today – Silver closed at $20.02 up 6 cents in New York. Ahead of New York’s opening it had fallen to $19.87.

Gold _{(very short-term)}

The gold price will pause ahead of the Fed review of the U.S. economy, in New York.

Silver _{(very short-term)}

The silver price will pause ahead of the Fed review of the U.S. economy, in New York.

Price Drivers

Gold & Silver – There were sales of 2.625 tonnes of gold from the SPDR gold ETF yesterday, leaving its total at 937.572 tonnes while the Gold Trust gold ETF dropped 0.45 of a tonne to 179 tonnes, leaving the total of the two funds at 1,119.197 tonnes ahead of the Fed’s review of the U.S. economy. The sale into a very well balance market has a slight downward impact, but not one that changed the positive direction of the gold market. But tomorrow, once funds have digested Mr. Bernanke’s remarks markets will act on what he says, no matter what. Our eyes will be on these ETF numbers as this is where U.S. investors do impact the gold price. Without them, the performance of the gold price would have been completely different in the last three months, with no precipitous fall from $1,650.

So what will Mr. Bernanke say? Because of current Fed policy to use the media as fine tuning on the financial markets, we appreciate that he will not give a timetable to interest rate increases. Giving a timetable to ‘tapering’ off Treasury purchases may also drive up interest rates, so he is unlikely to give that a timetable. To ensure the recovery continues to grow to a point where it has strong traction when the rest of the world is declining economically, he needs to give the impression, at least, that there is a very long time to go before he acts on either front. If he doesn’t, then expect markets to discount ‘tapering’ of Treasury buying and rising interest rates. As it is interest rate traders expect 10-yr Treasuries to move from 2.55% to 3% by the end of the year on their way through 4% next year. So we expect him to be either vague with words like, “...a long time before QE is reduced” or the like and for it to have a positive impact on all global financial markets including precious metals. If this does not happen, then global financial markets including precious metals will suffer. [Subscribe to our newsletters at www.GoldForecaster.com and www.SilverForecaster.com] This is a watershed point in the global economy. The fact that is depends on one man’s verbal expressions is a testament to the mercurial state of the financial world! Unfortunately, it will have only a short-term impact because considerably more action is needed by developed world governments on the growth front, before deep seated developed world growth takes a firm hold.

Silver – The silver price continues in step with the gold price.

Regards,

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