Gold and Silver's Daily Review for 26th November 2010
When you go on safari into the African bush you learn that signs are constantly being given telling you what dangers there are and what may well happen [such as the barking of Zebras warning of lions]. Those signs become paramount in guiding you.
The currency world and global economy sends out signals too that are paramount. In the days when there was a Deutschmark the sure signal that a revaluation of that currency was the statement from the Bundesbank that there would be no revaluation. It took between one and two weeks before it happened. Once the Irish rescue package was announced, Portugal moved into the firing line with Spain in the wings. Germany now assures us that the euro and Eurozone will survive. Please note that Portuguese government bond rates moved higher than both the Greek and the Irish bonds did before they received their bailouts. The issue is much bigger for Germany's future for if the Euro falls and the Deutschmark has to be resurrected then Germany will find its good quality goods priced out of the market, again.
The euro today is visibly weakening again at $1.3281 and now looks like $1.30 is beckoning. Perhaps we are lining up to see the euro: gold relationship broken? There is no good reason why it was there in the first place. Gold started the day in Asia moving with the euro and fell to $1,365 before London opened. It is looking more and more like next week will see currency turmoil. With a half day in the States ominously called 'black Friday' we say be careful out there!
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Gold – Very Short-term
Gold is moving with the euro which is falling. While we don't see too much movement down today, the consolidation we are looking at signifies some changing thinking at ground level, so we are looking at a 'quiet before a storm'. Prices will continue to revolve around the London Fixes with a bias to the downside.
Silver – Very Short-term
Silver will continue to be the mercurial follower of gold today. Consolidation should be today's play, but there's a storm brewing! Prices are not expected to move that much but where they do move it should be to the downside.
Gold Price Drivers
As we move towards another currency storm precious metal investors have to take their eyes off the gold price itself and look at the 'why' of the gold price. To this end we are posting part of an article shortly titled, "The Gold Price is not about Gold!" The full article will be presented in the next issue of the Gold Forecaster, which you can read when the holiday weekend moves into cruise mode. We do suggest that you put on your seat belts for next week, because as in the African bush, we are downwind of some ominous events!
Julian D.W. Phillips