Gold and Silver's Daily Review for 23rd November 2010

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When a man sees a drop in his income bringing him down to his needs he must drop his standard of living.  When he has a serious debt problem and faces such a drop, he loses many of the choices he has made as a man.  


But inevitable money overrules lifestyle when life gets difficult.  This is the same with a nation, when it has overspent.   Then we see a clash of politics with money.   Politics wins when you are a creditor, not a debtor. And this is where the Eurozone is moving to now.  If the Irish government falls and does not comply with the creditor's terms it will be impoverished as a consequence.   But the Eurozone itself is looking weak this morning as Portugal and Spain are being lined up for market damage on their debt.   More than that the market mood is there is a fifty-fifty chance that the Eurozone itself will fall.   The ripple effect on the global economy will be severe and collapsing confidence will send investors to gold in droves.   We are not talking about speculators here, but institutional level investors trying to preserve wealth, not particularly to make profits.   The gold price showed the change in sentiment even as the dollar rose, it moved above $1,360 again in Asia.   Thereafter, it moved higher in London attempting to rise through $1,370 but fall back to $1,361 where it was Fixed in London's morning.    It traded at that level up to New York's opening.

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Gold – Very Short-term

Gold is battling around the $1,360 level, where it is likely to stay in New York, barring dramatic news on the monetary front.   Buyers are not chasing prices and are happy to be led by the market.

Silver – Very Short-term

Silver is battling around the $27.30 level, where it is likely to stay in New York, barring dramatic news on the monetary front.   Buyers are not chasing prices and are happy to be led by the market.

Gold Price Drivers

Gold is undergoing a realization that its moves are not about the moves of the euro or the dollar.   As the dollar rose against the troubled euro, gold rose too.   The underlying reasons are more than simple market mood [overbought – oversold] but are of a deeply fundamental cause reflecting Eurozone monetary system fractures.   We are saying that the Eurozone is appearing to find these problems beyond their capacity to rectify!

The Irish government is falling, Portugal is next, followed by Spain, as these countries too may well not be able to repay government debt, despite austerity measures.  Unless contained, these problems will bring the euro down.  Europeans in general have not turned to gold properly, yet!

Regards,

Julian D.W. Phillips