Gold and Silver's Daily Review for 30th July 2010
Gold was ‘Fixed’ this morning in London at $1,168 after gold traded slightly higher both before and after the London Fix with two banks buying, two neutral and one bank selling. We have seen support hold in Asia and London, so New York may well follow suit. The gold price has a lot of work to do to stop falling and begin rising, but the fact that support is holding is encouraging.
The Euro de-coupled from gold earlier this year as Euro problems suppurated. We do not see this relationship re-gaining such credibility, for there is no reason why gold should be linked to the Euro. Nevertheless, we do expect a great deal of media and investment focus to try to relate moves in the Dollar or Euro to gold. We see the exchange rate between the two as irrelevant to the price of gold. Both are losing credibility steadily and the exchange rate simply describes the pace at which both are experiencing falling confidence levels. At the moment it stands at $1.30 with many seeing Europe’s austerity measures as unachievable, while members of the Eurozone. The strain may take some time to cause a fracture, but that is the sure direction. In the States more stimuli is needed to keep this recovery plausible. This will undermine the Dollar externally. So with ‘parity’ forecast for the Euro: Dollar rate, we expect the Dollar and the Euro to weaken against other mainline currencies. Gold will still be a good measure of their fall in credibility.
Gold has bounced off support at $1,160 with a good London Fix at $1,168 this morning. It is likely that New York will follow through on this, so we feel that the gold price will still have a stronger bias today.
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Silver has not followed through on the bounce today as it was Fixed at $17.66 only 6 cents higher than yesterday. No doubt we will see a ‘shunt’ effect should gold hold ground or rise today once New York opens. We do expect to see the silver price hold or move stronger today.
While attention has swung across to the U.S. both sides of the Atlantic are facing major debt crises still. With Spain about to be downgraded again, rating agencies have a beady eye on the U.S. and its triple ‘A’ rating. The sovereign debt crisis has enveloped the entire developed world, leaving the emerging nations of Asia holding huge volumes of developed world debt, unhappily. While they cannot unload this there are structural adjustments they can make [We discuss these regularly in our Gold Forecaster newsletter] to lower this burden. These are very gold-positive.
We have to stress that the monetary world is not facing debt problems by themselves but a major shift in the balance of economic power, which has the potential to rupture the shape of the economic world entirely, shaking the foundations of the present world order from top to bottom. We attempt to keep on top of these in our newsletters, to which you are invited to subscribe through www.GoldForecaster.com and www.SilverForecaster.com
Julian D.W. Phillips