Gold and Silver's Daily Review for 14th July 2010


"Asia held the gold price at its recent high of $1,214, before London opened.   London's first Fix was at $1,212.25.   Three of the five banks were buyers and one neutral leaving only one seller at the Fix.   All the deals at the Fix were done at that price.  

The gold price trading range has tightened markedly, pointing to an early resolution to the consolidation phase.   After the Fix it stood $1 higher than the fix on a weaker Dollar.   Then New York came in and took the price down $2 at its opening.

Asian demand is persistent and long-term, capable we believe of absorbing whatever gold comes to the market, steadily.   Investment demand likewise is persistent and large.   But neither of these demands is of a nature to chase prices upward.   There is no immediate pressure on the gold price nor do we expect any.   Foreign exchanges show a decline in the U.S. Dollar, not a strengthening of the Euro.   But the influence of the falling Dollar on the gold price has weakened to the point that gold is responding to overall currency market instability with the focus on Sovereign debt.

Gold – Very Short-term

With the consolidation continuing we expect today to see a gold price moving sideways to slightly higher.    For more precise forecasts on a weekly basis subscribe through or].

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Silver – Very Short-term

Silver will continue to follow gold, so today we expect to see it move sideways, to higher.

Gold Price Drivers

The most important long-term influence on the gold price continues to be the shift of wealth from West to East.   It is lowering the ability of the West to resuscitate itself with vigor.   This means that debt levels will become far more important in the developed world because of their lowering ability to repay them.   Borrowing is the developed world's way of life and has been for a decade and more.

In the East wealth creation and rising cash flows against a backdrop of surpluses have brought a very healthy financial state to the East.   As trade deficits with China show China is steadily weakening the developed world with its cheaper goods.   Extrapolate this position and you can see in a decade's time a developed world struggling to retain it economic health against a huge, financially healthy, vibrant and self-sufficient Asia.   Until Chinese wages are as high as those in the developed world or developed world wages are as low as those in Chine, this situation will not change.   By then the Yuan or a basket of leading currencies will act in place of the U.S. Dollar as the globe's reserve currency.   The transition to that point will be littered with various dramas, particularly on the financial front.

Sovereign debt crises, currency crises and a turning to gold in the monetary system, as we are now seeing, are symptomatic of the entire changing balance of economic wealth.   There is no way this will stop for decades.   Investor strategy should be set against this backdrop.


Julian D.W. Phillips