Gold & Silver Market Morning

Gold Today – The New York gold price closed at $1,309.50 down $23.40 on Monday in New York. Asia and London lifted it to $1,315. The gold price was Fixed in London at $1,314.75 down $7.75. In the euro, it Fixed at €951.821 down €8.516 as the dollar stood at $1.3813 down from $1.3766: €1. Ahead of the opening in New York gold stood at $1,316.00 and in the euro at €952.69.

Silver Today – The silver price closed at $19.98 down 31 cents in New York. Ahead of New York’s opening, it was trading at $20.17.

Gold (very short-term)

We expect the gold price to find its bottom soon, in New York.

Silver (very short-term)

We expect the silver price to find its bottom soon, in New York.

Price Drivers

We are getting reports that up to $70 billion could be withdrawn from Russia in the near future as investors react to the decaying state of relations over the Ukraine. At this point we have to try to draw a line between political posturing and the start of a financial ‘war’. We feel that that point will be when Russia imposes Capital/Exchange Controls to prevent the outflow of this capital. From that point on we could expect a ‘tit-for-tat’ process of financially destructive actions to begin. At that point we enter ‘extreme times’ and a developed world turning to gold for protection. If we do not see such controls imposed, Russia will already see its financial markets suffer badly as liquidity dries up, but there will be no ‘financial war’. It will take a very long time before capital returns to Russia, so it must decide on the value of allowing capital to leave the country against preventing its departure.

On Monday, we saw a purchase of 4.495 tonnes into the SPDR gold ETF but none into the Gold Trust. Their respective holdings are now at 821.467 tonnes and 166.14 tonnes. This is the second business day in a row that we have seen a purchase of over 4 tonnes. We are surprised by this and read it as an institutional investment in the face of deteriorating political global conditions as the impression is given that the confrontation between Russia and the West is going to worsen.

The fall in the gold price, in the face of the above, was surprising but consistent with a correction, after a change in trend in the gold price. To us it now appears overdone. The fundamentals for gold remain strong but in the last week Chinese demand has sagged as the Yuan continues to fall against the dollar. We do not think this fall is anything but short-term. Even in a flowing tide we sometimes see a wave pull back further than others, before it flows again. It looks like this pullback is one of those. As we said yesterday, we cannot say where it will bottom out, but we continue to say that we feel gold has resumed the uptrend and will turn soon. [For more on this, subscribe to www.GoldForecaster.com and www.SilverForecaster.com and visit www.StockbridgeMgMt.com to hold gold out of reach of potential confiscation]

Silver – The silver price is expected to rise faster and fall further as is its established pattern now.

Regards,