Gold and Silver's Daily Review for 24th August 2010
We have arrived at a day when what you see is not what you think is happening. The media tells us the U.S. Dollar is strengthening. Against the Pound Sterling it is, but against the Yen and the Swiss Franc it is weakening. Against the Euro it is strengthening. Or is this Euro weakening?
What it is, is an extension of what is happening in the U.S. Treasury market where Yields are falling, because investors are running to the investment that will survive better than others, not because it is a desirable investment. The same applies to the U.S. Dollar itself. In the gold market European investors and perhaps later to
day U.S. Investors are using the $: € link as a guide to gold prices again. Short-term investors use this link, but it has broken down for most of the year to date, so it will again. It appears that fear is the driving force ahead of the U.S. housing figures due out today. Let's see!
We are including an article [with the important conclusions for Subscribers] on why the gold market should not be called a 'bull' market in the next issue of the Gold Forecaster.
Gold – Very Short-term
The Fix at $1,218 is $9 down on the last Fix having fallen in Asia and London as they look to the U.S. Housing figures today. If that is the case the fall is for the wrong reasons, but indicates a softer day in the States for gold.
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Silver – Very Short-term
Silver continues to slip falling another 5 cents ahead of New York's opening. As with gold we therefore expect more slippage today in silver's price.
Gold Price Drivers
Russia took another 15 tonnes of gold in July, confirming our ongoing forecast that Russia and China are steadily, persistently acquiring gold as it is offered in the market. They do this in a way that buys good tonnages of gold without chasing prices. After all why pay up when you don't have to? They must be asking, will chasing prices produce more tonnage than we can acquire this way?
Private and institutional investors appear to be more emotional about the issue, buying when a price rise appears imminent and standing back when the news is not so dramatic. Ahead of bad economic news they tend to wait until the market starts to move before acting. When that news is digested they stand back and central banks move in on the consolidation process. So it will continue until demand grows stronger to the point where central banks are not getting the volumes they want in line with their buying programs. Then it will be time to shake out weak holders with a good price rise. First another dose of deleveraging may come as investors see more evidence of deflation. But it will not be reflected by a large fall in the gold price, we expect.
Julian D.W. Phillips