Gold and Silver's Daily Review for 5th November 2010

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It looks like the U.S. market was caught by surprise yesterday when it tried to sink the gold price, taking it down to $1,332 before it rose overnight to almost touch $1,390.


The moves were not only discounting the fall of the dollar but showed a gain in the euro as well.   To understand why, one has to widen ones vision to look at the 'big picture' which tells us that QE 2 affects far more than the U.S. economy.   It affects the dollar and its value against other currencies.   As gold was rising the dollar fall against the euro from $1.4 to $1.42 and is looking weak.   Only selective intervention can help it now.   During London's day gold held the $1,380 area right up to New York's opening.

The fact that gold rose in other currencies too tells us that its rise reflects the 'big picture' of the world of currencies.   Just think of the ramifications if the dollar continued falling towards $1.50 – $1.70: €1?   That won't just be a currency adjustment will it?   The way forward in the developed world has been set by this week's moves in the U.S. for the next two year.   A great deal can happen in that time too.   The reaction of the precious metal and currency markets confirm that, that is so.

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Gold – Very Short-term

The gold market must absorb the fall in the dollar and the global prospects for precious metals, so today should be steady to rising in the U.S.   We expect New York to remain positive on the gold price.

Silver – Very Short-term

The silver market must absorb the fall in the dollar and the global prospects for precious metals, so today should be steady to rising in the U.S.   We expect New York to remain positive on the silver price.

Gold Price Drivers

We have seen a change in the mood of the precious metal markets.   The waiting is over, the direction now asserted.   The hue is golden and we have the weekend to digest the changes.   The technical picture is pressing the developed world to reassess its position on the future of the gold and silver prices.   Before then, those who went short or who are coming into the market at this late time, will have to pay higher prices to get the gold they want.

Regards,

Julian D.W. Phillips