Silver Market Morning

May 17, 2012

New York bounced back to $1,550 yesterday and Asia and London held it in that region today ahead of the gold Fix. The euro was weaker at €1: $12707. This morning in London, gold Fixed at $1,547.00 and in the euro at €1,217.439 up €10. Ahead of New York’s opening it looked slightly weaker at $1,546.50 and in the euro, which also continued to slip, €1,217.81 while the euro was at €1: $1.2699.

Silver Today - Silver closed at $27.50 in New York and rose in London opened at $27.53. Ahead of New York’s opening it stood at $27.47.

Silver _{(very short-term)}

Silver is looking to consolidate around current levels, today in New York today.

Price Drivers

Gold – Despite the euro continuing to weaken, the gold price bounced back from the low point of $1,518 to $1,550 where it is now looking to consolidate. Short-term traders are cautious at these levels. Many have interpreted the currency moves as a strong dollar, rather than a weak euro [weakening the currencies of the Eurozone’s trading partners alongside it]. Would it be right to see the gold price simply moving with the euro [rather than a counter to the dollar]? We would argue that gold is a counter to all currencies, which is the reason it is held in central bank reserves today] The implications are that it will rise in the euro too, when it does. To link it myopically just to the dollar would not explain its rise from €300 to today’s €1,200. It is this larger perspective that will account for its future prices in the world’s different currencies.

The lackluster Indian buying we have seen since the start of the jeweler’s strike there has been compounded by the weakening of the Indian Rupee. Yesterday the Reserve Bank of India stepped into the market to defend the Rupee. Currently it stands at Rs.54.50 against the U.S. dollar having fallen in the last year from Rs.42 to the U.S. dollar. Their intervention into the Rupee market may halt the rise of Rupee gold and silver prices and reflect only the change in the dollar price of gold. This would make the Rupee gold price conform much more to the international price of gold as seen in the dollar and the euro. We are seeing a pick up in Indian demand as the marriage season comes to life this month and perhaps because of the stabilizing of the Rupee?

Silver – Silver has been a bit slower to respond to the change in the gold price in the last day as investors in the Americas take a ‘wait and see’ attitude to the gold price. [To follow our weekly commentary, please subscribe to our newsletters at www.GoldForecaster.com and at www.SilverForecaster.com.]