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


Just to let us know that the Sovereign debt crisis hasn't gone away, Spanish Sovereign Debt was downgraded to Aa1 from AAA.   On top of that we were given the news that the capital injection for nationalized Anglo Irish Bank could surpass $40 billion.   The government of Ireland is taking it over using up so much of its credit capacities.

That's just a small part of why the gold price is rising.   Asian gold demand, oblivious to developed world monetary problems, held the gold price at $1,307 until London opened and took it to $1,312 before the gold Fix, which was set at $1,311 after which it continued to rise to $1,315 ahead of New York.   There will soon be a lot of pain out there on naked short positions as this price continues to rise.   The awful feature of a 'short' position is that there is no limit to potential losses.   And a leveraged short is capable of destroying lives.   There appears to be no stopping the dollar's fall as it looks like going through $1.37 to the Euro, 0.9730, 83.30, and headed for $1.59 against the Pound.   I Euros the gold price has barely moved and still stands below €1,000, well below its high in that currency.

In the next issue of our newsletters we will post articles [Subscribers can access our archives] on "What's driving gold investment, Prudence or Profits?" and the Evolution of the Gold Market as $1,300 an ounce is crossed [for subscribers only].]

Gold – Very Short-term

Gold is on the move again today, showing vibrant strength as it digests the $1,300 and looks upward.   We expect a positive day for gold today in New York and elsewhere.

Silver – Very Short-term

Silver opened this morning at $22.   London Fixed at $21.35.  We expect silver will have a positive day in the States.

Gold Price Drivers

The main driver of the gold price today is the weak dollar.   It still has a long way to fall.

Anger against the Yuan being held down against the dollar continues to grow as legislation is passed aimed at slapping duties on Chinese goods.

With the entire world buying Chinese goods it is unlikely that this measure will deter China, because they would also start major crises at home if they did as the U.S. wants.

The first effect of such duties would be to lift prices to U.S. consumers.   The second is to risk retaliation by China, already very worried by the size of its dollar holdings.   In view of this, we do not foresee the U.S. taking serious actions against China.

What we do see is the increase in uncertainty and the prompting of prudent action by global investors to protect themselves against currency conflict.


Julian D.W. Phillips