New York closed yesterday at $1,643.80 up $2.60 in a narrowing trading band. The euro was steady at €1: $1.3219 up 50 cents. Today, gold Fixed it at $1,648.25 and in the euro at €1,246.220, while the euro stood at €1: $1.3226. Ahead of New York’s opening it stood at $1,653.00 and in the euro €1,251.32 while the euro was at €1: $1.3210.

Silver was$30.72 overnight, again moving with gold. Ahead of New York’s opening it stood at $30.79.

Gold _{(very short-term)}

Gold should continue to consolidate with a stronger bias, in New York.

Silver _{(very short-term)}

Silver should continue to consolidate with a stronger bias, in New York.

Price Drivers

The Fed tells us that growth in the States while slow is rising and should show a better picture by year’s end. The lagging and critical sector remains, housing. Interest rates rises may still be a couple of years away. It wasn’t said, but this pre-supposes that the U.S. will not be knocked off balance by events across the Atlantic in the Eurozone, where the words double-dip recession are going to become increasingly used to describe Eurozone economies. Some commentators say that house prices are bottoming, but economies can sit on the bottom for quite some time. The net effect on the gold market may be pretty neutral, with U.S. gold and silver jewelry markets picking up slightly. The 7% that the U.S. contributes to the global demand for gold will rise slightly, but not, we feel, to the extent that it pushes the gold price up. That comes from Asia and the central banks.

With the U.S. dollar and the euro trading in a tightening band and threatening volatility it does seem that there is a major move somewhere upwind. Will a U.S. recovery benefit the dollar? We think not. Will the euro falter and fall? Dragging gold with it? Currently the exchange rate management appears to have that scene under control. But history shows that such management does not succeed in the long-term and causes financial tsunamis when it breaks down. With that in mind, the superficial calm we now see in the foreign exchanges, the silver and the gold markets is warning that we should be ready for this to be shattered.

Which would you say is more important to the gold and silver prices, retail [jewelry] demand or central bank demand? We are producing an article on the subject for our subscribers in the next week. [To follow our weekly commentary, please subscribe to our newsletters at www.GoldForecaster.com and at www.SilverForecaster.com.]

Regards,

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