Gold and Silver's Daily Review for 1st July 2010
"With the gold price holding around $1,240 [and fixing in London at that price] in the face of more bad employment news in the States [closer to recession?], gold is holding up very well. Bear in mind other markets are not. This increase in joblessness is pointing to a further slowdown in the U.S. economy. Gold is already showing resilience that is attractive to new haven-seeking investors."
Gold – Very Short-term
It could Fix lower this afternoon in London and see a softer New York day.
With us reaching the last two days of the week ahead of the long weekend we expect lackluster markets. This is provided that these two days are not used to release news that will affect markets quickly.
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Silver – Very Short-term
Silver is struggling to hold up as it pulls back to the $18.4 area. It too may be quiet until after the long weekend. We are not of the opinion that it has the same value preservation qualities as gold in a tumbling equity world so do not favor it as much as we do gold. Next week may see dramas in all markets.
We will be addressing the issue of "Is Silver de-coupling from gold" shortly, in the Silver Forecaster newsletter.
Gold Price Drivers
The employment news is another indication that a double-dip recession is on the way. De-leveraging is taking place. Should the Dow fall through current support it will fall a considerable way as it culminates the head-and-shoulders formation it has patterned over the last year and more. With so little positive news around, it is difficult to see why this should not happen. This time though it is not just the U.S. that will feel the fall, but the developed and emerging world will fall too. As investors de-leverage and see their stop losses triggered, the fall will be sudden and vicious, when it comes.
Gold will pull back too in such an environment, but not for long. It value preservation qualities will come to the fore amidst the turmoil to come.
Precious metal markets remain hesitant in the face of these rising risks and will bide their time until market directions are clear. We repeat deflation, a double-dip recession and some social unrest are on the cards.
Enjoy your independence!
Julian D.W. Phillips