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

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Asia took the gold price up to $1,358 then London, just after the opening took it back down in line with the $: € exchange rate to $1,354 before taking it back up again just ahead of the long morning Fix which was set at $1,358.00.

This is the day that the Fed's two day meeting to decide on interest rates begins. The entire financial world is waiting for an announcement on quantitative easing.   How much, over what period and to what extent will it incite inflation?   We know that the Fed itself has said it is in uncharted waters. This was not an inspiring revelation but it is good for gold and silver.

The mid-term elections appear far more of a foregone conclusion with the Democrats said to be about to lose their teeth.  And this at a time when the U.S. needs a hard biting government to extract itself from the economic woes that could soon turn worse. Gold and Silver will benefit from both deflation and inflation.   The future economic picture will have to clear before most investors realize that that is the way to go.

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Gold – Very Short-term

While waiting for the Fed and the election results, gold will tend to be positive and still dominated by the dollar to euro exchange rate. We expect little action until towards the end of the week.

Silver – Very Short-term

While waiting for the Fed and the election results, silver will tend to be positive and still dominated by the dollar to euro exchange rate.   We expect little action until towards the end of the week.

Gold Price Drivers

Gold and silver will remain in waiting mode until after the Fed and or the Election results.   The risks are high at the moment as we saw in the last Commitment of Traders report, when even speculators heavily cut back their positions in the face of uncertainty in the direction of the precious metals.   We expect to see rising volatility, uncertainty and general stress levels to begin rising across the world from now on.   This will likely become an ongoing feature of the investment world.

In this environment investors must factor in darkening clouds.   There are tremendous opportunities but very different from those you find when the future is rosy.   But they can be just as profitable.   What is very different is the speed with which they present themselves.   Expect sudden changes in the investment climate from now on.   Emotions tend to cloud judgment in hard times, so look ahead now.      In the gold and silver markets prices have not yet reflected what lies ahead, we believe.

Regards,

Julian D.W. Phillips