Gold and Silver's Daily Review for 10th December 2010

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As President Sarkozy and Chancellor Angela Merkel 'unify' today in an attempt to present a political unity in the Eurozone [so that it can tackle the debt crises that have not gone away, the E.C.B. and other are managing to 'assist' the euro and the dollar exchange rates to give an appearance of stability.The reality is that the two currencies are slipping against the world's other main currencies slowly but surely.

It is becoming clearer by the moment that the U.S. could be moving closer to facing its own music.   The jump in Treasury Yields highlighted a considerable sell-off in U.S. Treasuries.  Could the U.S. face the same problems as Europe?   Granted the U.S. is both the largest economy in the world and the dollar the world's only reserve currency.   This puts it in a position like the only [huge] client of a bank, that needs to call in his loans.   If the client can't repay, the bank has to go bust too.   So what's going to happen?   It would be foolish to think that the U.S. has a captive market for too long.   There comes a point when the pack of cards tumbles.   History is replete with them.   When that happens there is no control over the collapse.

Apart from covering the gold and silver markets Gold Forecaster and Silver Forecaster are structured in a way that addresses macro-economic factors from oil to currencies covering the pertinent gold markets that directly affect the gold price and some that simply influence it.   It is a "must-read" for all who want to understand why the gold price is moving as it is and why.   It also aims to help you understand why currencies and today's national economic problems are influencing the global economy and the precious metal prices [we cover platinum in the Silver Forecaster too].

Gold – Very Short-term

Gold has traded in a tighter range than we expected and looks resilient.   We expect the gold price to lean to the positive today in New York.   Will the consolidation be short-lived?

Silver – Very Short-term

Silver has traded in a tighter range than we expected and looks resilient.   We expect the silver price to lean to the positive today in New York.   Will the consolidation be short-lived?

Gold Price Drivers

When the euro fell yesterday the gold price in dollars reflected that fall, but then traders came in to accelerate that fall and helped to trigger stop loss selling too.   It went too far, as we mentioned, closing around $10 below the exchange rate moves.   Today, in London, we saw that overrun made up and gold recovered back to where the exchange rate indicated it should be at $1,390.   [We are explaining this in the next article being posted in the next issue of the Gold Forecaster – Why does gold fall when the dollar rises? subscribe at www.GoldForecaster.com or for silver at www.SilverForecaster.com].

While both the dollar and the euro are sliding, what is more frightening is that the U.S. is beginning to see reactions to its debt problems.   With an emasculated government the U.S. is in no real position to handle it.   The Fed without the power to really assist except on the surface, is being left to manage the crisis.   If the Treasury sell-off accelerates we could be on the brink of a financial disaster that makes the 'credit-crunch' pale into insignificance.

We continue to believe the largest buyers of gold continue to set price limits and wait for offers, but they are waiting and still hungry.

Regards,

Julian D.W. Phillips