Silver Market Morning

Gold Today – The gold price closed at $1,289.20 down only $0.20 yesterday, in New York. In Asia and London the gold price lifted back to $1,291. The gold Fixing was set at $1,289.00 down $2.25 and in the euro at €933.246 up €7.22 while the euro stood at $1.3812 nearly 2 cents down from the week’s peak. Ahead of New York’s opening the gold price stood at $1,289.40 and in the euro at €933.33.

Silver Today – The silver price closed at $19.17 down 14 cents on Thursday, in New York. Ahead of New York’s opening, it was trading higher at $19.19.

Gold _{(very short-term)}

Again, we expect the gold price to attempt to recover to +$1,300, today in New York.

Silver _{(very short-term)}

Again, we expect the silver price to continue to follow gold, today in New York.

Price Drivers

Mario Draghi, head of the European Central Bank expressed serious concern over the high exchange rate of the euro and gave a clear indication that in June action would be taken to resolve it. We note that the G-7, when it was the G-8, agreed not to take direct action to weaken exchange rates. But ‘a rose by any other name, smells as sweet’. So while action will be taken, likely to lower interest rates into negative territory, we are puzzled at what action to expect. Simple quantitative easing is difficult because buying government bonds in the E.C.B. is seen as financing governments which is not allowed. And Mr. Draghi is a forceful man who will take action to weaken the euro exchange rate even indirectly. To that end the euro has fallen back from the week’s peak of $1.3993 to $1.3812 today, but Mr. Draghi will want much more than this. The knee-jerk reaction of the gold price by traders will be to attempt to make it fall with the euro, but we believe that the E.C.B.’s action will disturb markets, as inflation is stoked. It is the stoking of inflation in the developed world that supports the gold price there, but we remind ourselves that the body of demand for gold is coming from Asia and will continue to do so.

There were no sales from the SPDR gold ETF or from the Gold Trust. Their respective holdings still stand at 782.852 tonnes and 164.02 tonnes. The gold price had a quiet day remaining on support within its recent trading range. It could go either way so we should be ready for a volatile day with a better prospect of a rise than a fall. [For more on this, subscribe to www.GoldForecaster.com and www.SilverForecaster.com and visit www.StockbridgeMgMt.com to hold gold out of reach of potential confiscation]

In India the traditional gold buying season is coming to an end as farmers turn their attention to planting ahead of the monsoon’s arrival there. In the past 70% of India’s demand came from the agricultural community, but as urbanization and communications improve alongside greater knowledge of gold markets, the Indian seasonal influence on gold diminishes. The gold ‘doldrums’ there used to last from now until end August, but in the last few years this has been the time when record gold prices were seen. So we do not lend too much weight to this influence now.

Silver – The silver price remains cautious with gold waiting for gold to give direction.

Regards,

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