Silver Market Morning

Gold Today –New York pulled back slightly to $1,254.10 from $1,255 at the close on Tuesday. Asia took it to $1,255.30 ahead of the opening in London. The dollar traded barely changed at $1.3664. London held it around there until it Fixed at $1,254.75 up $1.25 on Tuesday. In the euro, it Fixed at €917.886 down €1.237 reflecting a slightly stronger dollar which stood at $1.3670. Ahead of the opening in New York gold stood at $1,259.05 and in the euro at €921.47.

Silver Today –The silver price slipped to $19.58 down 5 cents at the close in New York. Asia took it back up to $19.63 and held it there before London’s opening. Ahead of New York’s opening, it was trading at $19.67.

Gold _{(very short-term)}

We expect gold to consolidate with a positive bias today, in New York.

Silver _{(very short-term)}

We expect silver to consolidate with a positive bias, in New York.

Price Drivers

Monday saw no sales of gold from the SPDR gold ETF [GLD] and none sold from the Gold Trust gold ETFs, leaving their respective holdings at 790.456 tonnes and 161.37 tonnes. Gold and silver prices remain on support and strong support at that.

The news of the day remains emerging market currencies, in particular, the Turkish Lira and the South African Rand. International banks have in the past borrowed cheap dollars to get the interest arbitrage opportunities. But the time has come for these “carry trades” to be unwound. In the hope of stopping the capital outflows, the Turkish central bank raised interest rates from 7.75% to 12%, a massive hike that the media are trying to translate into a solution to the value problems of the Lira. Past experience of such moves points not to a solution but to desperation. If you are owed money by a dubious debtor and they come with an offer of more interest, would that give you confidence? When capital flees a country from locals, governments impose Exchange Controls. When foreign capital flees the country little can be done except to force on them longer term repayment schedules. At the moment the calmness to go that route is not there, so be prepared for more capital outflows. South Africa still has Exchange Controls in position from 1986 so can simply tighten these to slow the outflow. They are reviewing interest rates there today so we could hear an announcement later. With the S.A. mining industry the victim of ongoing strikes and heavy current account deficits, South Africa could follow Turkey and suffer a plunging exchange rate, once more. In Oct 2012 the Rand was 6.80: $1. This week it hit R11.21. Unless quick action is taken, we expect the Rand to trade at somewhere south of R12: $1 soon. Gold prices are jumping in those currencies as they fall. [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]

Silver – The silver price is again riding tandem with the gold price and showing the same firmness.

Regards,

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