Gold and Silver's Daily Review for 18th August 2010
Asia did little to hold up the gold price after New York closed. Consequently the gold price slipped lower than yesterday's afternoon Fix in London which was $1,226 25 cents down on the morning Fix.
When London opened the gold price slipped, ahead of the Fix at $1,223. New York after taking it down in line with the afternoon Fix at $1,218 decided it should make it run. At the time of writing it stands at $1,228. This is on Technical considerations as well as on fund demand in the States.
Fear abounds in the currency world as many in Japan feel that the Yen could rise to 78 against the U.S. Dollar a disaster for Japan's exports. But in Europe the $: Euro exchange rate hardly moved from the $1.28 area. In the States so much money is going into U.S. Treasuries as other bonds prove attractive. This is reinforcing the foreboding of further bad economic bad news on the way. For gold investors this is all positive as it persuades even the prudent to look beyond the Dollar and equities to investments that will ride or do well in a storm. What is of interest is the feeling that there is a lot of untapped value in the gold equity markets as well.
Gold – Very Short-term
The Fix at $1,218 gave way to a run to $1,228 and continues to point the way for the rest of the day to be positive for the gold price.
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Silver – Very Short-term
After a Fix today of $18.36, 30 cents more than yesterday, silver fell back to around $18.22 today before joining gold in a run back to $18.36 at the time of writing.
We do expect a positive day for silver in New York.
Gold Price Drivers
One issue that will rise to the top of the global pile, is the issue of moving exchange rates to accommodate other nation's economic situation. For instance the U.S. wants China to allow the Yuan to rise, so as to reduce its competitiveness in world markets, but China will not give up any international competitiveness for their exports.
Germany feels the same in the Eurozone. It is unwilling, like China to promote consumerism to stimulate its economy for the benefit of the rest of the Eurozone. Both the Dollar 'peg' of the Yuan and the single currency yoking diverse European economies together will produce extraordinary strains in all countries, threatening the stability of the currency world [of which the Dollar is the fulcrum] in the days and years to come. Nothing stops capital and manufacturing from moving to the most efficient parts of the Eurozone or to China. The mood of uncertainty has now become a long-term feature in the currency world.
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Julian D.W. Phillips