Silver Market Morning

Gold Today –This issue is the first since 15^th and so is a weekly report. On Friday gold closed weaker at $1,243.20 down $44.50 on the previous Friday in New York. Asia let it slide another $12.10 cents before London held it there ahead of the Fix where it was set at $1,231.75 down $50 on a week ago in London. In the euro it Fixed at €911.957 down €41.442 on a week ago. Ahead of New York’s opening the euro stood at $1.3512: €1 with gold at $1,231.40 and in the euro at €911.34.

Silver Today – Silver fell to $19.87 down 94 cents on the previous Friday in New York. Ahead of New York’s opening, it traded at $19.73.

Gold _{(very short-term)}

The gold price should have a weaker bias in New York, today.

Silver _{(very short-term)}

The silver price should have a weaker bias in New York, today.

Price Drivers

Returning after a week in Durban [South Africa] from a vegetative, vacuous state that one should have on holiday we now look with a clear perspective at the forces that impact the gold price now. While we see the Technical picture still dominating U.S. sales, the dollar continues weak against the euro and sterling. This appears to have precipitated sales from the U.S. based gold ETFs there. The SPDR gold ETF saw 13.504 tonnes of gold sold from the SPDR gold ETF over the last week and 1.91 tonnes sold from the Gold Trust, leaving their holdings at 852.209 tonnes and 170.30 tonnes respectively. Nevertheless, it is strange that such sales should have this disproportionate effect on the gold and silver prices. [Find out more from www.GoldForecaster.com and www.SilverForecaster.com to subscribe to our newsletters and visit www.StockbridgeMgMt.com to hold gold so it can’t be seized]

With robust Chinese demand coming out of China unabated, we ask the question, why do U.S. sales have such an impact. We see two reasons. The first is that Indian gold imports have been halted by their government. Indian demand usually accounts for 25% of global gold supply. Take 25% of demand from any market and you should have prices collapsing. But the gold price in the last week has fallen 5% only. This describes a rise in other demand sources. When [not if] the Indian government relaxes its grip on gold imports and a chunk of Indian demand returns to international markets the supply of gold in global markets will be insufficient to cope with it.

Now add to that the benefits of the Chinese sourcing gold outside the markets that determine the gold price [only referencing its price to that market] and we see the way bigger amounts of gold can be bought without pushing gold prices up. But there is a point where supplies to the global markets are too low and prices inexorably have to react. But when? While inevitable, its timetable is impossible to accurately predict. This is where long-term, ongoing investors look the wisest.

Silver – The silver price has fallen far further than the gold price in the last week, reverting to its more volatile nature on the fall and on the rise. In the last month the silver price has fallen from a peak of $23 to $19.70 a 14% fall.

Regards,

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