Gold & Silver Market Morning, January 05, 2012

The U.S. closed with gold at $1,602 then Asia took it to $1,610. This price held until just before the Fix when it slipped to $1,603. 40. The euro looked healthy early in London’s morning then slipped slightly to 1€: $1.3030 leaving gold in the euro at €1,230.50. The a.m. Fixing this morning was at $1,603.00 and in the euro at €1,229.955. Ahead of New York’s opening the gold price held around the Fixing price at $1,602.55 with the euro at €1: $1.3017 leaving gold in the euro at €1,231.07.

Silver moved up slightly with gold to open in London at $29.45 up a dollar from yesterday.  Ahead of New York the silver price fell slightly to at $29.31.

Gold _{(very short-term)}

The gold price should have a mixed to better day, in New York today.

Silver _{(very short-term)}

The silver price should have a mixed to better day, in New York today.

Price Drivers

With the gold market moving back to full speed now the gold prices will more accurately reflect demand and supply. We say this with a caveat though.

As truly global market will allow buyers from all over the world to be able to buy and sell gold when the bulk of buyers and sellers are doing so. We don’t have that yet. Currently, at the two London Fixes the bullion banks link by phone to their customers, wholesalers, who in turn link to their active customers by phone allowing the world’s main players to be ‘present’ at Fixing. The links can reach as far as the main gold dealers, who are linked into the retail trade.  

In Asia, the main bullion banks link to the main wholesalers on the physical gold front which operates like any wholesaler; replenishing stock as they dip and when certain stock levels are reached. This delays to some extent the reactions of the retail trade to the current gold price, lowering the sensitivity of that market it. In China where the retail trade is far more dependent on imported gold, the sensitivity is lowered further as the replenishment of stocks is a less frequent activity with stocks held at higher levels. Until there is an Asian pair of daily gold Fixes, Asia will not reflect the sensitivities that the London market does. With China now pushing Shanghai as their preferred financial center and not Hong Kong, we do expect, at some time in the future, Shanghai to hold its own daily Fixes. Then we will see Asian demand have a considerably greater, immediate, impact on the gold price on a daily basis. Such a development would in turn reduce volatility in the gold price reflecting the around 74% of physical gold demand from Asia and the U.S. contributing only 8% of global physical demand.  [More on this in our newsletters and on our website [So subscribe through www.GoldForecaster.com or www.SilverForecaster.com]   

Regards,

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