Gold & Silver Market Morning, May 02 2012

New York closed Friday at $1,661.70 and slipped in Asia to $1,656 ahead of London to $1,662.25. The euro was weaker at €1: $1.3212 50 cents weaker. Today, gold Fixed it at $1,652.50 down $4 and in the euro at €1,257.706 up a euro, while the euro stood at €1: $1.3139. Ahead of New York’s opening it stood at $1,652.00 and in the euro €1,257.04 while the euro was at €1: $1.3142.

Silver was$30.97 at the close in New York but opened in London at $30.87. Ahead of New York’s opening it stood at $30.60.

Gold _{(very short-term)}

Gold’s trading range should continue to narrow, with a slightly weaker bias, in New York.

Silver _{(very short-term)}

Silver’s trading range should continue to narrow, with a slightly weaker bias, in New York.

Price Drivers

Investors should continue to keep their eyes on the Indian Rupee, which is now almost crossing the Rs.53 to $1 level, keeping gold prices in India rising. Indian investors relate to Rupee prices of gold not U.S. dollar prices. If they were to see gold in U.S. dollar prices they would be buying now. Of course, it is the weakening in the value of the Rupee that should be prompting Indian investors buying, but this awareness is not the current perception there. What this shows us is just how easy it is to lose sight of the ball in the gold market. Most of our readers relate only to the dollar price of gold or secondly to the euro price. However, the gold price is a measure of the value of currencies and not the other way around where currencies measure gold. But with Indian demand reaching over 800 tonnes in a good year, out of 2,800 tonnes of newly mined gold supply annually [28%] this feature of the gold market is important. [To follow our weekly commentary, please subscribe to our newsletters at www.GoldForecaster.com and at www.SilverForecaster.com.]

While many believe that Chinese demand should be thrown in with Asian demand, it is very different from Indian demand in its nature. Chinese gold demand comes with no religious connotation, no family obligations to provide financial liquidity and security to daughters getting married but with the main common denominator of saving real money. Both types of demand are to ‘buy and hold’ for the long-term. Both believe that the rising price confirms the wisdom of further investment in precious metals [silver included] and do not look for a ‘top’ in which to sell. However, both can still be fooled into believing that a Yuan or a Rupee price measures the value of gold.

The Indian government will allow the Rupee to weaken and prefer that Indian investors change their attitude to gold as it reduces money supply to the broad economy [they ignore the black financial system], whereas the Chinese government encourages its citizen’s to investment in gold.

Regards,

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