Gold and Silver's Daily Review for 25th August 2010
Asia held the gold price up at levels New York took it up to, but then the London market felt it should rise even more. At the morning Fix, a price of $1,237.50 was set with two of the five bullion banks net buyers at that price.
It is clear and confirmed by the World Gold Council now that European gold investors are holding gold long-term to protect their wealth, not for a shorter term profit. This is significant for the gold price. Why are they now changing their views? There is no doubt that with gold at these prices there is a lot of capacity for prices rises relative to the quantities of gold on offer.
As each day passes it is clear that the governments of the developed world have not succeeded in getting consumers back on their feet. With so many vested interests and political priorities clouding the view of what should be done to resuscitate the consumer, the stimuli injected to date has failed to lift him up. Yesterday's report of a 27% drop in house sales in the States was blamed on the cessation of Tax breaks to home buyers, so we ask, did government not understand the negative impact this would have? Did they not understand the ripple effect on the rest of the economy? Did they not understand that this could be just the trigger to set the double-dip recession on its way?
We are including an article [with the important conclusions for Subscribers] on The Changing Face of Investing – From Capital Growth to Interest/Dividend earning instruments in the next issue of the Gold Forecaster. We feel it is important for investors to know that these changes are critical to the preservation of their hard won wealth!
Gold – Very Short-term
The Fix at $1,237.50 is just about $20 up on yesterday morning's Fix. The news on the housing front precipitated the change from down to vigorously up. While the pre-opening prices ahead of New York's opening pushed the gold price down to $1,233 that digestion process may not be complete yet, so we expect a positive day for gold in the States too!
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Silver – Very Short-term
Silver turned around sharply after the housing market news yesterday and shot up 4% to hold the present level of $18.65 and looks to continue the strong path up in New York today. As with gold we therefore expect a positive day for silver in the States.
Gold Price Drivers
Something remarkable happened in the precious metal markets of gold and silver yesterday.
The news from the housing market could not have been more negative for the U.S. economy. The only way the U.S. is going to see real growth is if there are sufficient jobs. This leads to greater disposable income, which leads to people buying houses. This is where U.S. growth starts! Consumers will react by postponing house buying as long as possible, buying needs and saving for when the blows hit and waiting for government to lead them back to prosperity. Translated the news meant that the likelihood of a double-dip recession hitting are very strong now.
What was remarkable about that? When such news struck in the past, all markets fell quickly including precious metal markets. This time there was no de-leveraging in gold. The gold and silver prices immediately jumped. Could this be the end of de-leveraging in those markets? This is very gold positive.
Julian D.W. Phillips