Gold and Silver's Daily Review for 30th December 2010

When markets are relatively quiet such as now, the trend pushes through. In the last day or two we have seen the dollar and the euro slip to new lows against the Japanese yen, the Swiss franc and in the emerging world the South Africa rand. 

Against each other the euro and the dollar have been fallen at different speeds, overtaking each other in turn, but at the end of the day at $1.3245 the changes are slight. What is highlighting the currency confusion is gold which is rising in all currencies at $1,412.70 [yesterday afternoon's Fix was at $1,412.50] or €1,066.59 [yesterday afternoon's Fix was at €1,075.37].  That the p.m. Fix was €11 [and $1] higher, than in the morning, was positive for gold's future direction.  The demand remains European and Asian as we see in the rise in the euro.  Gold is more than robust!

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Gold – Very Short-term

The gold price is still rising in the euro and in the dollar and we expect that it will do so today in New York, but with less vigor than yesterday.

Silver – Very Short-term

The silver price is still rising in the euro and in the dollar and we expect that it will do so today in New York, but with less vigor than yesterday.  

Gold Price Drivers

It is true that the U.S. dollar, despite its ails will continue to be the world's reserve currency.   Until the Chinese financial markets and currency have developed and matured further the yuan will not move into the main currency stakes.   Once the Chinese yuan is ready it will storm the currency world.   But with half the U.S. Treasury bonds owned by China as part of its $3 trillion reserves, its power over the U.S. financial markets is growing.   It has not yet used this power and won't unless it is in its national interests dictate that it does.  Think for a moment, if China did use its power and it was felt that such a use may detrimentally affect the stability of U.S. financial markets, what would U.S. authorities do?   The consequential actions would undermine the U.S. dollar.   This is a real and present danger that has nothing to do with the economic state of the U.S.

The need to find support for currencies losing confidence internationally has given rise to the possibility of governments confiscating gold, not the reasons that the gold confiscation took place in 1933.   That was for internal monetary reasons [on the surface] to expand the gold based money supply by devaluing the dollar.   Today, such fears are growing alongside the burgeoning Chinese dollar reserves.  This and several other monetary issues will demand a great deal of attention in 2011 onwards!   [For access to future articles on this subject, we suggest you subscribe to the Gold Forecaster and Silver Forecaster where such articles will appear in the future.   We will also be looking at the path ahead for gold and silver in 2011.   There too, we will publish reports on companies like Coeur d'Alene [silver and gold] and other attractive junior mining companies in the gold and silver worlds.   We recommend that you subscribe or continue to subscribe to these newsletters to be ready for the gold and silver markets in 2011.


Julian D.W. Phillips