Silver Market Morning

Gold Today – The gold price closed at $1,243.10 on Monday, up 10 cents in New York. In Asia and London the price rose $1 until the Fix, where it was set at $1,244.25, down $0.50 and in the euro at €914.419 down €0.841, while the euro stood at $1.3607. Ahead of the opening in New York the gold price was trading at $1,246.20 and in the euro at €915.72.

Silver Today – The silver price closed at $18.75 up 1 cent, in New York. Ahead of New York, silver was trading at $18.87.

Gold _{(very short-term)}

The gold price should consolidate, in New York today.

Silver _{(very short-term)}

The silver price is should consolidate, in New York today.

Price Drivers

No sales or purchases from the gold ETFs in the U.S. last yesterday and the Technical picture is discouraging investment buyers, who are waiting for lower prices. The holdings of the gold ETFs continue to stand at 785.279 tonnes in the SPDR gold ETF and at 163.41 tonnes in the Gold Trust. Physical demand is sufficient to hold up prices, but not to drive them higher at the moment. This is why we still expect lower prices this week.

We are moving closer to the E.C.B. meeting this week and just ahead we see that E.U. inflation is now two points lower than the previous month at 0.5% versus 0.7%. This confirms that the threat of deflation is very real. The structure of the E.U. is not such that it can bear up under deflation as well as the U.S., because of the Federal system in the U.S. After the elections in the E.U. there was a shift to the right and back to nationalism. The prospect of Federalism in the E.U. is now reversing. So deflation will cause far more disruption in the E.U. than in the States, where, while there is growth, it has not yet gained convincing traction. Both these situations combined with the continuing shift of power and wealth to the East are structural and unlikely to change with a drop in interest rates. Even Q.E. is unlikely to resolve the situation, while it will protect the banking system.

In China growth is on the rise again as indices hit six-month highs and the services sector is now burgeoning in line with the government’s plan to enlarge the middle classes there. Unless you have visited China and seen the Chinese react to government in an almost regimented way, it is difficult to see just how they have managed to build the economy in such a short time. The nature of the people and the control of their government over all sections of society is absolute. The difference between the developed world and the emerging world is so vast that one can see why this shift of wealth and power is almost osmotic. Their love of gold is just as structural. That’s why any pull back in the price has to be temporary as long as wealth rises in China. [For more on this subscribe to www.GoldForecaster.com and visit www.Stockbridgemgmt.com to protect yourself from penalties from holding your gold overseas when it is to be confiscated].

Silver – The silver price riveted to gold.[More in the www.SilverForecaster.com]

Regards,

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