Gold and Silver's Daily Review for 20th October 2010
Mervyn King, Governor of the Bank of England echoed the thoughts we expressed earlier this week, when we expressed fears that nations were seeking their own interests to the exclusion of the global good.
He major economies' policies are in "direct conflict" with each other and that "collective" action is required to rebalance the world economy. Failure to find common ground risks the imposition of trade barriers and weaker global growth. When weighing national interests against international interests leaders have no choice, because of political structures. This makes the future more predictable as we move towards protectionism, further currency turmoil, more Capital Controls and possible Exchange Controls. Uncertainty and fear are what gold thrives on.
The euro has fallen against the dollar giving the picture of a strengthening dollar and falling gold. We strongly suspect that this was an 'assisted' strengthening by monetary authorities in Europe and the U.S. and was simply aimed at weakening the euro, not strengthening the dollar. As a result the gold price fell in the States to $1.33: €1 but recovered overnight and in London to $1,340 ahead of the Fix. The euro fell to $1.37 at one point but stands after the Fix at $1.3835. The Fix came in at $1,340.50 and €970.04 [a €10 drop].
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Gold – Very Short-term Gold does not look as though it will drop further, but needs to re-group and continue consolidating today.
Silver – Very Short-term Silver will follow gold and re-group today after the pullback to $23.75.
Gold Price Drivers
The wind of politics has blown up the waves of the gold market, but there is no change in the current or tide there. The froth we see now will calm in the days ahead, but the market is unchanged. It's just the dollar price that lends drama to the market. U.S. investors would be wise to ask themselves where is gold going in the euro and where is the dollar going in the dollar index. These are two separate stories!
U.S. investors currently look very uncertain with day traders calling the shots there. To succeed fully in the gold market, U.S. investors must be global in their outlook. Subscribe to Gold Forecaster if you wish to better understand the gold market.
Julian D.W. Phillips