Gold and silver’s daily review for 25th January 2011

Gold continued to fall in both the dollar and the euro [$1,332.8 and €976.20] with no support coming out of Asia.   The gold price is still falling but yesterday saw 10 tonnes of sales from the SPDR gold ETF.   This was after a large [20 tonne] purchase the day before.   Overall there has been a steady ongoing depletion in the holdings of the U.S. based SPDR gold ETF over the last several weeks.   One cannot be certain if this is a perception that the dollar will recover against gold or whether investors are selling the gold held for them in the U.S. and buying physical gold to be held overseas to avoid any potential confiscation.

It was Fixed in London this morning at $1,326 and at €975.36.   The euro stands at $1.3619 slightly higher against the dollar as euro yields are more attractive than those on the dollar.   The dollar remains steady against other ‘hard’ currencies.

Gold – Very Short-term

While support is not far away, Gold’s downside risk remains high even after the falls of the last three days.   We expect it to tend to weaken still today in New York.

Silver – Very Short-term

While support is not far away, Silver’s downside risk remains high even after the falls of the last three days.   We expect it to tend to weaken still today in New York.

Gold Price Drivers

There are several reasons why the shareholders of the SPDR gold ETF shares are selling.

• There may well be a perception that U.S. equities are about to rise medium term.
• Investors may well believe that the dollar is about to rally.
• As mentioned above, it may be that these shares are being sold with the intention of buying physical gold overseas to avoid a potential confiscation by the government.

In Europe gold investors who bought in fear of a Euro collapse are reassured to the extent that it will not happen and are liquidating some positions.

There has been no major change to gold’s fundamentals so we do not believe that we are witnessing a change of trend.

Indeed, one of the major reasons why gold is rising is that central banks continue to buy.   Yesterday the Central Bank of Russia reaffirmed plans to buy from domestic banks 100t of gold per year to replenish the country’s gold reserves.

• In 2010, Russia’s purchases reported by the WGC increased 23.9% to 790 tonnes, or 25.4 million ounces as at January 1^st 2011.   It was reported that Russia is buying its gold from local production, which is just over 200 tonnes.
• In 2009, the central bank’s gold reserves increased by 4.1 million ounces (127.5 tonnes) to reach 20.5 million ounces (637.6 tonnes) as of January 1, 2010
• As of January 1, 2009, the amount of monetary gold in Russia’s international reserves was at 16.4 million ounces (510.1 tonnes).

While the additional 100 tonnes is to be added to Russian reserves, we may well see this as a rough estimate only.   The availability of gold ‘on offer’ will determine how much if any more than 100 tonnes will be bought.

Apart from covering the gold and silver markets Gold Forecaster and Silver Forecaster are structured in a way that gives perspective to macro-economic factors, from oil to currencies, covering the pertinent global gold and silver market influences that directly affect the gold and silver prices.   It is a “must-read” for all who want to understand why the gold and silver prices are moving as they are and why.

Subscribe at www.GoldForecaster.com or for silver at www.SilverForecaster.com].