Silver Market Morning

Gold Today –The gold price in New York rose to $1,262.50 up $21.90 on Tuesday then Asia took it lower to $1,256 ahead of London’s opening. London held it around that level ahead of the Fix, which was set at $1,255.25 up $9.50. In the euro it Fixed at €912.047 up nearly €6.00. Ahead of New York’s opening the euro stood at $1.3764: €1 with gold at $1,256.15 and in the euro at €912.63.

Silver Today – Silver rose with gold to close at $20.40 up 53 cents in New York. Ahead of New York’s opening, it traded at $20.31.

Gold _{(very short-term)}

The gold price should continue to consolidate with a weaker bias, in New York, today.

Silver _{(very short-term)}

The silver price should continue to consolidate with a weaker bias in New York, today.

Price Drivers

While Chinese demand remains robust it appears to be compensating for the loss of demand from India. Smuggling into India adds to this demand but cannot be accurately measured. What is clear is that the $1,260 level is an important overhead resistance level. The potential for short covering, if this level is broken open, is large. This may take some time to do? Again we expect volatility to rise, both ways, as the gold and silver prices continue to search for a clear direction to go in.

The dollar continues to weaken against the euro, sterling and other currencies and now stands at $1.3771 to one euro. We, again, see it continuing to fall.

A considerable portion of gold demand is by-passing the market as is apparent from the burgeoning demand from China and low prices in the market. Investors should be cautious when expecting the New York and London gold prices to accurately reflect true demand and supply fundamentals. After all, if a good portion of demand is taking supply directly from suppliers and not through the established markets in London and New York, then how could these markets reflect true demand and supply in the gold price? The same applies to India’s Trade figures. If gold is entering the country illegally and not reflected in official figures, then the Trade Deficit will lessen giving a false picture of the Balance of Payments.

For gold and silver investors, what does this mean? There is a point where the demand that by-passes the market heavily impacts the established markets. This is because the lack of supply will lead to the large buyers then taking what these markets have. At that point the perception of the gold market, as well as the price of gold will change dramatically. We will have to wait until that happens as it cannot be reliably forecast.

There were no sales from the SPDR gold ETF but there was a sale of 1.07 tonnes into the Gold Trust yesterday. The SPDR gold ETF holdings now stand at 835.705 tonnes and the Gold Trust holdings at 167.90 tonnes. [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] Again this sale had no impact on the gold price.

Silver – The silver price has the potential to outpace gold’s rise soon.

Regards,

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