Gold & Silver Market Morning, April 27 2012

New York closed yesterday at $1,657.6 up $13.80 with little change in the €: $ exchange rate. The euro was steady at €1: $1.3208 down 11 cents only. Today, gold Fixed it at $1,654.00 and in the euro at €1,250.283, while the euro stood at €1: $1.3229. Ahead of New York’s opening it stood at $1,655.25 and in the euro €1,250.76 while the euro was at €1: $1.3234.

Silver was$31.16 overnight, moving better than gold. Ahead of New York’s opening it stood at $31.16.

Gold _{(very short-term)}

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

Silver _{(very short-term)}

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

Price Drivers

Japan sounded alarm bells by increasing the levels or quantitative easing and moving interest rates of 0.1%, nearly zero as the ongoing specter of deflation plagues the nation. The moves certainly support the lowering of the Japanese Yen on foreign exchanges and we are seeing this already as the Yen slipped half a Yen against the U.S. dollar. This was the second time in three months. The Bank of Japan said it will increase the size of its asset purchase program by 5 trillion yen ($61.88 billion) to a total of ¥70 trillion, while leaving its policy interest rate in the current target range of 0% to 0.1%. It also extended the maturity of bonds it buys to 3 years from a two-year limit. At the same time the government is attempting to double a 5% sales tax to contain the world’s largest public debt burden.

Japanese investors are very gold aware and have more than enough competence to see that attempts to increase inflation and lower the exchange rates are very positive for gold prices in the Yen. That’s the gold price to them, not the dollar price. We are talking here about one of the four most important reserve currencies in the world. While Japanese investors may not flood into gold, the episode in the saga of the state of the developed world currencies is another reason to outside observers, including central banks, why gold should be held in their portfolios. [To follow our weekly commentary, please subscribe to our newsletters at www.GoldForecaster.com and at www.SilverForecaster.com.]

Meanwhile back in the Eurozone, Spain has been downgraded from A to BBB+. Watch their borrowing costs to see how the markets are reacting. We are watching their regional government situation as well as the banks property holdings, which could well spark a serious bank crisis yet again. Some central bankers are looking questioningly at the euro as a reserve currency.

Regards,

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