Gold and Silver's Daily Review for 2nd December 2010

With the Eurozone crisis getting worse today as pressure moves to question the E.C.B. itself and its ability to contain the contagion now said to include Italy after Spain. The prospects of some of the poorer nations eventually being ejected from the EU has moved from possible to probable.


The very structure of the Eurozone is now being seen as faulty as Germany enjoys a low euro exchange rate relative to its economy. The poorer Southern EU nations and Ireland suffer too high a euro exchange rate relative to their economies. Will they follow Argentina's lead, which cut its 'peg' to the U.S. dollar for the same reasons? At some point nationalism will overwhelm banking concerns. If the Irish government changes in 2011 and opts to leave the EU and return to their old currency the punt what then?   We await the pricing of Spanish bond sales today with interest.

Meanwhile China is buying more and more gold seemingly on an exponential basis!

Gold Fixed at $1,390 [$1.5 down on yesterday morning and $5 up on yesterday afternoon] and €1,052 [€10 down] this morning in London with the dollar at $1.3157: €1.

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Gold – Very Short-term

Gold is marking time ahead of New York with the feeling positive in the gold market today.   Market expectations are for good news for gold ahead of us and bad news for currencies.

Silver – Very Short-term

Silver is marking time ahead of New York with the feeling positive in the silver market today.   Market expectations are for good news for gold ahead of us and bad news for currencies.

Gold Price Drivers

Banker's values rule the roost today.   Their judgments can be harsh and crushing on a nation.   At what point does sovereignty fall to finance?   History shows finance falls to sovereignty, eventually.   Wars have been fought over less than this [Remember the Merchant of Venice by Shakespeare?].   One fact is consistent through history and that is the pressures we are seeing now have always promoted gold.   That's why central banks hold gold!   This is not about the price of gold it's what gold can do when currencies can't.

Meanwhile, for reasons divorced from the developed world's problems the Chinese are buying gold in line with the speed of the growth of their middle classes.   This pattern will continue as long as China continues to develop.

Regards,

Julian D.W. Phillips