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

To our surprise Asia drove the gold price well into resistance at $1,250 up two dollars on New York's close.   This was evidence of the steady tide of demand from the east.   There was little change on the $: € exchange rate but the Swiss Franc, the Pound Sterling and the Yen edged higher.  

This set the tone for London's day where the Fix was set at $1,250.   As New York's opening approached the gold price rose again to the $1,254 level showing rising global physical demand.

With employment figures due on Friday in the States, equity and other markets are expecting depressing news.   Consequently we saw the shares of the gold Exchange Traded Funds bought to the extent of 4 tonnes of gold.  We believe that the current state of the gold market results in that particular buying pushing prices up as it is not driven by acquiring gold in volume, but in getting into the market even at the cost of higher prices.   We are including an article [with the important conclusions for Subscribers] on The Changing Face of Investing – From Capital Growth to Interest/Dividend earning instruments in the current issue of the Gold Forecaster.   To find out our preferences and for our full range of weekly forecasts please subscribe through: – or for our weekly newsletters.

Gold – Very Short-term

Asia then London gently nudged the gold price through the $1,250 level and area of strong resistance.    London physical buying took it to $1,254 before New York opened.   This suits buyers of gold looking for good volumes of gold because it is the triggering of 'stops' that brings the sellers out.   So we expect that the day will be a day when prices hold at these levels as resistance is worn away.   Any more attacks on resistance will see it give way.

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Silver – Very Short-term

Silver is showing a certain robustness that tells us that it is not simply moving with gold but has an extra element of demand that could well lead to it running ahead of gold, on the rise.   We expect another positive day for silver.

Gold Price Drivers

As the expectation of a double-dip recession takes hold and may well become self-fulfilling, U.S. buying of Exchange Traded Funds appears to be driving the gold price through resistance.   Demand from the East and from institutions [not chasing prices] underpins the market.   U.S. buying [particularly fund buying] is prepared to chase prices, so we expect any further bad economic news to wear down resistance.

We are seeing the gold market reflect a host of fundamental influences having an almost tidal effect on the price as a result of the disappointments being experienced in the developed world economies.

The actions in Japan are so inadequate that the Yen is expected to rise still more into the Y78 area.   Tragically this is setting the scene for speculative pressure on the Yen in the days ahead, pushing until the Bank of Japan and the Japanese government takes solid effective steps to curb its strength.   However, as most realize, Japan needs a growing U.S. economy to invigorate exports.   Without this the Bank of Japan needs to be seen to undermine the Yen's strength, visibly.   This is yet another impending crisis due to mature in the days ahead.

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Julian D.W. Phillips