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

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Both Asia and London held the gold price at yesterday's morning Fix level this morning.   The gold Fix came in at $1,313.00 ahead of New York.   Gold then slowly took out the last record high moved up ahead of New York.   New York may well be livelier than London.

The Sovereign Debt problems of Ireland are larger than Greece's, relatively speaking.   With the government using up so much of its own credit and its economy in a recession, there is little chance of it being able to repay its debt.   With the U.K. warning it may print money even if it incites inflation.   This will mean that all the U.K. [and Ireland's] debt will be debauched until inflation lowers the burden of repayment.   Sad to say, worldwide, inflation is being seen as a real way out of debt crises.   Mr. Bernanke of the Fed indicated the U.S. may follow the same road.   In a nutshell, this means the value of un-backed currencies [government obligations] will decrease in value.

Before that central banks may wait until they see the pain of deflation hurting, then inflation may be seen as solving the problem.   Then the electorate may calmly accept it.

The dollar went through $1.37 and keeps falling.   Please note that the gold price fell €5 this morning showing us gold is not rising it's the dollar that's falling.

In the next issue of our newsletters we will post articles [Subscribers can access our archives] on "What's driving gold investment, Prudence or Profits?" and "Have Central Banks lost control of the Gold market?" These may not be posted on public websites, so subscribe to make sure you get them.

Gold – Very Short-term

Gold is strong above $1,300, but the market is still getting used to these price levels, so today may be a mixed but volatile day in New York and elsewhere.

Silver – Very Short-term

Silver opened this morning at $22.   London Fixed at $22.07.  We expect silver will have a mixed but volatile day in the States.

Gold Price Drivers

The main driver of the gold price today continues to be the weak dollar.   It still has a long way to fall.   We are just at the start of a disruptive and structurally damaging global currency crisis.   There appears to be little will to avoid this by the nations involved.

The Bank of Japan's interference in the Yen / $ rate is failing for the dollar is falling as opposed to the Yen strengthening.   This not only makes the B of J's task nigh on impossible, but highlights how the U.S. appears to be letting its own currency slide. This does signify the failure of the 'floating' rate system and turns any discussion on exchange rates into national posturing.   Friction then takes the place of cooperation.

Regards,

Julian D.W. Phillips