Gold and Silver's Daily Review for 15th November 2010


Friday saw markets tumble between 2% & 4% with computer triggered 'stops' bringing in most of the selling.   We do believe that the inability of the G-20 meeting has had a detrimental effect on global hope.

Essentially the message sent by the G-20 meeting was that there will be no resolution of the currency problems that need fixing urgently, but that friction between the U.S. and China has stepped up a notch.   The tumble in the gold price happened in the U.S.A.  As we have mentioned many times before, the main gold buyers are Asian and central bank in nature, neither of which will chase prices.   Tumbles that we saw on Friday do bring in buyers.   Central banks will take offered bullion, but not rush out to buy it.   Consequently it will be left up to the U.S. market to call the shots.   How can this happen, you may ask, when the bulk of gold traded happens in London?     It is the marginal trading that dictates prices in the very short-term, but over the long-term the trend will always dominate.  Global friction breeds market volatilities, which is what we are now seeing.  The morning Fix in London was set at $1,367.00 and traded around that ahead of New York's opening.  The dollar held close to its strongest level at $1,36.17 during London's morning.

Apart from covering the gold markets Gold Forecaster and Silver Forecaster addresses macro-economic factors from oil to currencies covering subjects that directly affect or influence the gold price.  This week and next, we will cover the concept of gold being used as a reference for currencies. Only part of it will be seen in the public domain.  It is a "must-read" for all who want to understand gold and silver.   It helps you understand the why of the gold & silver price moves.  [We also cover platinum in the Silver Forecaster too].   Without understanding can you successfully profit from these markets?

Gold – Very Short-term

Gold should consolidate today as the markets digest the recent volatility and the future monetary scene.   We expect the bias to be positive if gold moves today.

Silver – Very Short-term

Silver is back at the $26.10 level down from a high over $28.   We expect silver to consolidate today with the bias positive if gold moves today.

Gold Price Drivers

The G-20 conclusion left President Obama castigating China's overvalued currency, justifying the QE 2 on the basis that U.S. growth is good for the world economy.   China is a chasm away from that thinking.   The way forward in currency markets will therefore be for each nation to look for its own good.   We expect currency markets to be volatile and capital flows of such enormity that the concept of economic fundamentals dictating exchange rates will be the first casualty.  We do expect a great deal of short-term exchange rate manipulation and a distortion of the true value of a currency.   It is a short-term outlook that will cause long-term structural damage to the world's monetary system.   On the monetary issues that require a high degree of international cooperation, we now expect postponement or abandonment in the face of disagreement.

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Julian D.W. Phillips