Gold & Silver Market Morning, February 01, 2012

New York closed at $1,739.6 but Asia pulled it back up to $1,733 before London lifted it ahead of the Fix to $1,746. The euro was a little weaker at €1: $1.3142 ahead of London’s opening.

At the Fix gold was set at $1,744.00 and in the euro at €1,327.649. At the time the euro stood at €1: $1.3136. Ahead of New York’s opening the gold price was holding the Fix’s level at $1,744 with the euro at €1: $1.3128 leaving the euro price of gold at €1,328.46.

Silver was steady at $33.76. Ahead of New York’s opening silver stood at $33.83.

Gold _{(very short-term)}

Yet again, the gold price should have a steady to stronger bias in New York today.

Silver _{(very short-term)}

Yet again, the silver price should have a steady to stronger bias in New York today.

Price Drivers

Another day and Greek negotiations with the E.U. have still not concluded. We are being told to be optimistic as Portuguese debt yields rise strongly again, implying that they may be next in line for debt write downs. Meanwhile the markets are most worried about the state the banking system is in. Even banks are scared by neighbour banks, who may tumble if one of these nations go bankrupt. As it is the distrust between banks is noticeable in the main street. With such a situation, if a major bank tumbles then liquidity requirements dictate that central banks pour new money into the holes left in the system. The reasoning will be to make sure the monetary system keeps functioning properly, no matter what. This will be a bigger consideration than the value of any currency. Is there an end in sight to this state of affairs? We can’t see one. What we do see is falling confidence not only in governments but in the developed world monetary system. It is under these darkening clouds that lightening strikes without warning, before the storm.

What we sense is the expectation of such financial strikes that come out of the blue, after hours and when we can do little about them. We will have little, if any warning. It would be foolish of Greece or any country not to have a Plan B to cover the failure of these debt negotiations. Should it be necessary, you may go away for the weekend, then come back to find the trap has sprung and you’re in a different world.

We saw a touch of this in the gold price, when the gold price jumped $65 in a couple of hours last week. Silver is doing the same but there is a greater robustness in the silver price than we see in gold, still. The joy of silver is that its industrial applications have moved from wants to needs. As such demand won’t fall off in a poorly behaving economy. We note that the U.S. is now a heavy importer of silver as is China. To get more of the right perspectives on the gold and silver markets and where gold and silver prices are going, subscribe through www.GoldForecaster.com or www.SilverForecaster.com].  

Regards,

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