Silver Market Morning

Gold Today – The gold price closed at $1,306.70 down $31 on Monday in New York. In Asia and early London, prices began to recover rising to $1,310 ahead of London’s opening. The gold price was Fixed at $1,312.00 down $9.60 and in the euro at €965.203 down €4.664, while the euro was weaker at $1.3593. Ahead of New York’s opening, gold was trading at $1,311.60 and in the euro at €964.80.

Silver Today – The silver price closed in New York at $20.92 down 51 cents. Ahead of New York’s opening it was trading at $20.97.

Gold _{(very short-term)} We expect gold to consolidate with a positive bias in New York today.

Silver _{(very short-term)} We expect silver to consolidate with a positive bias today.

Price Drivers

After what is looking like a halted attempt to thrash the gold price with a ‘bear-raid’ followed by the sale of futures contracts to the value of $1.37 billion [the equivalent of 32 tonnes of gold] we saw U.S. gold investors jump in with both feet to buy 8.681 tonnes of gold into the SPDR gold ETF on Monday and 0.78 of a tonne into the Gold Trust. The holdings of the gold ETFs stand at 808.728 tonnes in the SPDR gold ETF and at 165.06 tonnes in the Gold Trust.

If the recovery continues on the physical front we expect to see just as heavy short covering as we saw naked shorts. Bear in mind that COMEX is a financial market not a gold market as only around 5% of trades result in a physical movement of gold. We were surprised at the vigor of U.S. gold investors buying so much gold. The purchases certainly stopped the gold price fall in its tracks. We will re-issue an article we produced on why such a bear-raid could not succeed, in our opinion. The gold price now needs to consolidate further before taking on $1,330 again. However, the market is likely to prove volatile while this process continues.

The I.M.F. has castigated the E.U. for its low growth and the increasing likelihood of deflation. The burden is squarely on the shoulders of the E.C.B. as the overall government continues to fail to promote growth. Hence it is becoming a near certainty that Draghi will adopt a form of Quantitative Easing, tailored for the E.U. This should, when it comes, lead to a weaker euro and be very good for gold.

In India, now that hope of an easing of gold import restrictions have faded we expect the insatiable appetite for gold in India to turn more vigorously to smuggled gold. No doubt Indian investors, who were waiting for the relief, will now accept current duty levels and re-stock. While the World Gold Council guesstimated smuggled amounts of gold at 250 tonnes the real figure could be much higher. Smugglers are unlikely to provide reliable numbers. We believe that the level of premiums on the internal price of gold will prove to be a good indicator of the levels of smuggling. The lower they are the closer to internal Indian demand the smuggled amount must be. It is the quiet time of the year for gold there, but this is set to change in September. [Subscribe www.GoldForecaster.com – ensure your gold will not be confiscated and you not penalized -see www.Stockbridgemgmt.com ].

Silver– Silver will recover with gold. [www.SilverForecaster.com]

Regards,

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