Gold & silver daily review

The gold price looked anemic at the start of the week falling to $1,420.00 at the first London Fix of the day and to €1,009.45 with the dollar holding $1.4044.

The gold price just ahead of New York’s opening was trading a $1,413.55 and the dollar at $1.4030.

Gold – Very Short-term

Gold looks as though it will tend weaker in New York today.

Silver – Very Short-term

Silver was Fixed at $37.68 on Friday in London, but fell on Monday after the gold Fix to trade at $36.75 during London’s morning.   We expect it to hold current levels or show a weaker bias in New York today.

Gold Price Drivers

The gold price fell in Asia after the 125-page report on world markets was issued by the People’s Bank of China, the Chinese central bank.   In it, it said, "We need to note that gold prices have reached historical highs, and its downward risks should not be overlooked."   The market has interpreted this to mean that they thought the gold ‘bull’ market was nearing its end.   It also said the concerns about inflation would lead to the demand for gold.   It could also be seen as the usual Chinese inscrutability [are they buyers?] and sensible caution.   They also felt as the economic recovery in the developed world took hold interest rates would rise slightly.  "In 2011, the dollar will be on a downward trend overall, because of the slow recovery of its economy, low interest rates and twin deficits," the central bank said. "The possible spreading of European sovereign debt crisis and geopolitical risks may push up the dollar in some periods."

With elections in Portugal likely in June the country the exiting government head, Socrates said at a summit of EU leaders in Brussels on March 25, which the country does not need a rescue.  Portugal’s 10-year bond yield advanced to 7.835% on Friday [4.5% higher than Germany’s] telling us something different.  The nation faces bond redemptions of about €9 billion ($12.8 billion) on April 15 and June 15. It is thought that Portugal has sufficient funds to cover the April redemption of €4.5 billion, but doubts persist about further funding would for the June 4.9 billion-euro redemption.

Taking the Chinese view on the dollar and the Eurozone crisis we continue to expect the dollar to fall faster than the euro, despite the ongoing dramas in Europe.   Spain is moving further away from needing a bailout we are told, as it reforms labor and Pension laws.   The market expressed confidence in Spain’s actions as they dropped yields on Spanish 10-year debt to 5.14% from 5.67% on November 30th last year.

We looked around for news today of the E.U. meeting that would resolve the Eurozone crisis but found none.   What is very clear is that the E.U. has to resolve the problem of a rich north and a poor South as both areas share the same interest rate levels.   The strain of this divide alone ensures further Eurozone problems in the future.   However, we have to raise an eyebrow on the prospect of the dollar falling faster than the euro when we consider Eurozone problems.   It all remains ‘gold-positive’.

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