New York dropped the gold price down to $1,640.80. The euro was steady at €1: $1.3089. Today, gold Fixed it at $1,640.00 and in the euro at €1,246.295 down €10, while the euro stood at €1: $1.3160. Ahead of New York’s opening it stood at $1,643.20 barely changed on yesterday and in the euro €1,245.60 down €12 while the euro was at €1: $1.3192.

Silver was Fixed at $31.79 in London. Ahead of New York’s opening it stood at $31.82. Silver is more robust than gold today.

Gold _{(very short-term)}

Gold should consolidate around current levels, in New York.

Silver _{(very short-term)}

Silver should consolidate around current levels, in New York.

Price Drivers

Warnings came yesterday from the G-20 and from the I.M.F. to the Eurozone that the crisis is far from over. So we have to factor in more stress for Greece, Spain and Italy. The eventual departure of one appears almost certain in the face of this.

Efforts will be focused on saving the Spanish Banking system with its toxic portfolio of Spanish property. We see government taking financial power from the Spanish regions, for they spent all they had, leaving the newly elected with just debts.

The I.M.F. sees the Eurozone banks’ balance sheets shrinking by $2.6 trillion in the next year. Reserves are going to have to be increased to compensate for this. This has to be new money. This new money will be seen as anti-deflationary, not inflationary. Quite something, when you think that central banks can ‘disappear’ bad assets from bank’s balance sheets and replace them with freshly printed money, leaving a zero sum. This kills deflation without inflation and we are left with our eyes spinning as we watch this “now you see it, now you don’t” act. Such is the power of central banks. And you are left with the feeling that all is well. Pity your bank won’t write off you ‘bad assets’ and give you new cash in their place, ignoring asset values. And after all is said and done, we may see a $3 trillion of such money in the next year? Or will banks be allowed to suffer. Not at all! Will countries be able to see their debt disappear into banks, banks sell it to the central banks and get new money for it. Or will there be dire consequences for such games, such as the persistent loss of confidence? Certainly, there will come a point when hard assets will reflect such games. [To follow our weekly commentary, please subscribe to our newsletters at www.GoldForecaster.com and at www.SilverForecaster.com.]

The auction of Spanish 10-year debt went far better than expected, which is why the euro is stronger today.

Regards,

Julian D.W. Phillips for the Gold & Silver Forecasters