Gold and Silver's Daily Review for 4th November 2010

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Mid-term elections in the U.S. were gold neutral.   Fed statements appeared to be positive, but ahead of the announcement, some very brave 'bears' raided the gold market and in thin trade hammered the gold price down to $1,332, which held even after the announcement.


Then the gold bull stuck a very sharp horn into the backside of the bears towards the close and it started to rise.   The rise continued through the night in Asia reaching $1,354 just ahead of London's opening.   Once London opened the gold price took off again and soared to $1,365.   The dollar started to fall from just below $1.40 and stood at $1.425 ahead of the London Fix which then Fixed at $1,361.50.

It is tragic to see the Fed have to do the work of adding impetus to the U.S. economy when it should be doing it as part of a much larger program of creating employment and ensuring the businesses receive the extra money supply. This didn't happen before and is unlikely to happen now. With an emasculated government economic uncertainty will persist. For gold it means that the U.S. will not be able to hold the dollar at present levels. If foreign investors feel this the prospects for the dollar will look increasingly bleak. Because of this the uncertainty as to the direction of gold is being removed.

All in all, QE 2 is gold and silver positive.

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Gold – Very Short-term

Oh how right we were!   Gold fell $26 in New York then overnight gained $32.   We expect New York to remain positive on the gold price.

Silver – Very Short-term

Oh how right we were!   Silver fell into the high $23 area before recovering to the new record level of $25.4 ahead of the opening of New York.   We expect New York to remain positive on the silver price.

Gold Price Drivers

The dollar is tumbling, so gold is rising and attacking resistance.   The U.S. has told us the direction of gold through an emasculated government and a Fed, inadequately equipped to handle economic government and yet issuing new money.   Should the dollar keep falling, which we expect it will, gold and silver will surprise all with their performance.

Regards,

Julian D.W. Phillips