Gold and Silver's Daily Review for 7th July 2010

goldforcaster"The Gold Fix in London this morning was $1,186.00 after a quiet Asia looking at a weaker technical picture for gold than seen for a while.  

With huge support around these levels the gold market waters are deep, but on the surface quiet.   We do feel that there is a considerable change going on in the entire monetary world that is going to change the monetary world considerably.

In the absence of startling news the gold will continue to look for good support.  The fundamentals for gold are strengthening quietly, but strongly.    The main question we ask is, "are falling prices producing gold in the market.   With only one bullion bank buying at this morning Fix, two on the neutral line and two selling, we believe that central banks remain buyers."

Gold – Very Short-term

Gold has to find its bottom before consolidating again.   Support is heavy close to these levels.   If falls do occur, we do not expect them to be large.   New York should come in a seller, but for how long?

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Silver – Very Short-term

Silver is fighting to hold ground at $17.60.   As the recovery either moves sideways or stalls demand for silver in industrials may fall in line with the recovery.   We expect silver to fall again until it sees good support.

Silver will track gold again today.

We will be addressing the issue of "Is Silver de-coupling from gold" shortly, in the Silver Forecaster newsletter.

Gold Price Drivers

The Monsoons in India are now good, boding well for the gold and silver markets in late August onwards.   This year, in India we may well see silver grow in popularity in India as gold may prove just a tad too expensive for many in the rural community.   Chinese retail demand should continue to grow well.   Below $1,200 we do expect to see bargain hunters move into the market buying.   While many Indians balked at the price over $1,250, they are of a nature to see the current pullback as a discount and trust any bottoming pattern in the price.   Overall Asian demand in the second half of this year may well absorb a considerable portion of the gold on offer, provided central banks and other institutional buyers don't move prices up out of their reach.

BIS holding gold

In its recent 2010 annual report, the Bank for International Settlements stated that "gold which the bank held in connection with gold swap operations, under which the bank exchanges currencies for physical gold" stood at 8,160.1m in Special Drawing Rights, the equivalent of 346 tonnes of bullion, up from zero in 2009.   At 346 tonnes, this would represent the biggest gold swap in history.

We do not believe this gold has been sold into the 'open' market.   It is a major significance to the gold market and monetary system.   We are writing on this in the current issue of our Gold Forecaster newsletter and will explain there why we conclude as we do subscribe through .


Julian D.W. Phillips