New York held the gold price down slightly to $1,650. The euro fell back to €1: $1.3083 after rising yesterday above €1: $1.31 and gold slipped back along with it to $1,648. Today, gold Fixed it at $1,646.50 and in the euro at €1,258.407 while the euro stood at €1: $1.3084. This is lower in the dollar and higher in the euro. Ahead of New York’s opening it stood at $1,645.30 and in the euro €1,257.83 while the euro was at €1: $1.3080.

Silver rose slightly overnight and stood at $31.70 in London. Ahead of New York’s opening it stood at $31.60.

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

Developed world gold demand is lackluster currently. But it is clear that this was a significant gold price driver some years ago and has not been one for quite some time. In the very short-term this lack of demand does emphasize weak demand when Asian demand is itself slack, but when Asian demand is ‘normal’ then western demand loses that significance.

Indian demand has not revived as strongly as was thought, when the gold jeweler’s strike stopped recently. We emphasize that the Indian investor is guided by the Rupee gold price and that is rising because of the weakening Rupee.

The price performance of gold during the long period of consolidation that we have seen over the last few months tells us another significant feature of today’s gold market. Asian demand is even more focused on available supply than on price. Supply is at its greatest when retail demand is low. Then central banks and banks sending gold into Asia tend to wait for the offer of decent quantities before buying, as opposed to chasing set amounts on a daily basis. This ensures that the gold price does not run up but tends to consolidate. Further, we expect that this will not change until new or more buyers appear to try to capture those quantities from the passive buyers. [To follow our weekly commentary, please subscribe to our newsletters at www.GoldForecaster.com and at www.SilverForecaster.com.]

We are about to go through the same process as we went through with Greece, but with a considerably bigger country, Spain. The I.M.F. warned today that austerity in Europe is not the way forward. We agree with that, for when a man or nation is under the pressures we see today the only way forward realistically is to increase the income with which to pay off debts. Excessive austerity will only reinforce failure and make certain deflation and social unrest. This, at first, can be gold negative, but subsequently gold positive. 2012 appears certain to become increasingly turbulent and structurally damaging to the money system.

Regards,

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