Silver Market Morning

Gold Today –New York closed at $1,193.20 up $9.80 over Tuesday’s close. Asia held it there as did London. The LBMA Gold price was set at $1,193.00 up $8.55 on Tuesday’s level. The euro equivalent stood at €1,062.52 up €1.25 while the dollar was weaker at $1.1225 down from $1.1351 against the euro. Ahead of New York’s opening, gold was trading higher in London at $1,194.30 and in the euro at €1,063.92.

Silver Today – The silver price closed at $16.54 up 26 cents on Tuesday’s level. Ahead of New York’s opening it was trading at $16.70.

Gold _{(very short-term)} The gold price should consolidate, in New York today.

Silver _{(very short-term)} The silver price should consolidate, in New York today.

Price Drivers

The euro fell to $1.1210 but the dollar index was slightly firmer at 94.50 up from yesterday’s level of 94.40. It appears to be stabilizing at these levels as it consolidates. The trading ranges of gold and silver are narrowing to a tight band in the $1,180 -$1,190’s in what seems to be preparation for a strong move. We can feel the markets tensioning despite the seeming calmness on the surface. We have seen the current tight range in gold prices for, nigh-on, two years now so the patterns we see tells us a strong move is due. This is deeply significant now. There were imperceptible purchases of gold into the SPDR gold ETF on Tuesday of 0.003 tonnes of gold but no movement in the Gold Trust. The holdings of the SPDR gold ETF are at 728.325 tonnes and at 166.14 tonnes in the Gold Trust.

Yesterday Chinese demand was relatively small, while India, moving into its planting season is also seeing lowering gold demand. But just as its high demand did not impact the gold and silver prices, so its lower demand is doing the same. This is the major anomaly in the gold market, just as silver’s fundamentals have not impacted the silver price, so far. Western Market traders and speculators have held prices down for some time now.

Nevertheless, May is the month when we expect to hear from the I.M.F. on the way forward for the Yuan to be used in the Special Drawing Rights. By doing so the Yuan’s presence in the global monetary system would be made ‘official’. That is a major move forward in the establishment of a multi-currency monetary system, a departure from dollar hegemony. Both China and the U.S. will hope that it is a smooth transition, but we feel that this can only be achieved with major government interference in markets. Without clear defensive action the dollar and the euro remain vulnerable in their roles in global trade and finance.

We do not expect either a smooth transition or a smooth future as the global financial pressures we see ahead will be set against a far from robust global economy. With central banks fully aware of the need to stock Yuan in their reserves as well as other currencies, alongside needing to hold their gold reserves closer to home, as part of this global adjustment, we expect gold to see several structural changes to its outlook going forward.

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Silver– Silver prices are still performing better than gold prices.

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Regards,

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