Gold and Silver's Daily Review for 1st December 2010


While the euro appeared to stop falling, it did continue to do so but at almost the same rate as the dollar did against other 'major' currencies.   But the global currency markets were not happy at all as the 'contagion' effect of the Eurozone crisis spread to Portugal Spain and Italy as their bond rates traded at around a 5% yield higher [+7.5%] than the German Bonds [which traded at a +2.5% yield].

This implies that the markets do not trust the rescue package or the receiving nation's ability to repay those loans.   With the loans in the rescue package at 5.8% interest, the difference between north and south is established to the detriment of the euro.   The gold price reflected this and has risen over $30 and +€40 in the last couple of days.   The European investors drove the gold price higher as they reflected their fears and went for gold.   It is clear that the problems facing Europe will not go away for a few years now.

Meanwhile the U.S. has brought the spotlight onto their almost $14 trillion debt and a $1.3 trillion deficit this year.   As we forecast, the Republicans and Democrats are not doing a good job of addressing the matter, nor will they it seems until national interests overrule party politics.   But which politician is going to risk his career on moving away from party lines?   No wonder the two main global currencies are falling and smaller ones anxious to fall with them.

Gold Fixed at $1,391.5 and €1,062.62 this morning in London with the dollar at $1.309: €1 as we wrote this.

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Gold – Very Short-term

Gold has the bit between the teeth now and is again attacking $1,400.   We see a positive day in New York despite a rise of $26 in the last two days.

Silver – Very Short-term

Silver performed very well and is now nearly three dollars up in the last two days a whisper away from $29.   We expect this positive performance to continue today in the U.S. of A.

Gold Price Drivers

Fear rules Europe today as Portugal is auctioning its 12-month Treasuries tomorrow.   The market does not expect them to see very good demand and will be relieved if the offer is taken up.   It is the secondary market for these Treasuries that will tell the tale over the weekend.   The market believes Portugal will be pressured into a bailout situation by the end of the weekend.   It seems that Italy has been allocated a place in the queue too.   The sovereign debt markets smell blood, it seems.   With the U.S. now attempting to look at ways to address their tremendous debt, the question is being asked, "will the U.S. convince the market that the dollar-debt is manageable?"

We have never known such doubts about currencies since the early 1970's!   What is worse is that the U.S. no longer has the monetary power to have all other developed and developing nations tow their line and accept their policies on money.   And Asia has already told us all that they are worried!


Julian D.W. Phillips