Gold and Silver's Daily Review for 13th October 2010
Asia pushed the price of gold up forcefully overnight taking it to $1,358 on Globex before it fixed in London at $1,358.50 this morning. Thereafter, in London it continued to attack the $1,360 level without breaching it, while the Swiss Franc, the Japanese Yen and the Euro continued to rise against the U.S. Dollar.
With Fed Chairman raising expectations on inflation we have confirmation that the buying power of the U.S. dollar will be cheapening. It will continue to do so at home and abroad. While this may help make savers spend and increase the velocity of money at home, it will send a wave of worry though the nations that have huge stocks of the U.S. dollar and likely send another tsunami of capital from U.S. shores to higher interest rate bearing nations. It is hard not to see other nations from following this. It will also slow the rate of any rise in the Yuan. Add to this the confrontational posture of the U.S. and we have quite a storm brewing in which gold will continue to shine.
While the U.S. gold investors that buy physical gold in the States are fairly uncertain, gold bullion prices wallow there and gold is taken off their hands by Asian and London buyers novernight.
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Gold – Very Short-term
Gold should continue this short-term consolidation pattern today with a more positive bias.
Silver – Very Short-term
Silver should continue to behave positively today as it sits on $23.50.
Gold Price Drivers
The lines of battle are being drawn up in foreign exchanges as currencies continue to destabilize, with strong currencies getting too strong and the U.S. now stimulating and inflating the dollar at home. Too large a part of these new money flows are leaving the country to push emerging currencies higher, hurting their exports. We believe there are some dramatic moves afoot in China to lower that country's vulnerability to the weakening U.S. Dollar. They could come before the end of the year or early in the New Year. We have written about these in the next issue of the Gold Forecaster.
Julian D.W. Phillips