Gold and Silver Market morning, November 22, 2012

Gold Today –New York closed at $1,729.20 up $1.50 on yesterday. This morning, Asian and London dealers took the gold price higher to trade at $1,729.70 ahead of London’s opening. It was Fixed at $1,729.75 up $3.00 on yesterday morning’s Fix. In the euro it was Fixed at €1,344.226 down €6.5 from yesterday while the euro was stronger at €1: $1.2868. Ahead of New York’s opening, gold was almost the same at $1,730.25 and in the euro at €1,343.73.

Silver Today – As gold rose slightly silver moved with it closing at $33.33 yesterday, in New York. It then traded at $33.35 until, ahead of New York’s opening it stood at $33.30.

Gold _{(very short-term)}

Gold is expected to consolidate with a stronger bias, in New York today.

Silver _{(very short-term)}

Silver is expected to consolidate with a stronger bias, in New York today.

Price Drivers

Gold & Silver – We will give you a break from our daily ‘soapie’, the Eurozone crisis today and clarify that central banks keep on buying gold with Brazil adding 17.2 tonnes or 50% to its holdings in October. In addition, Turkey’s central bank increased its bullion holdings by 17.5 tonnes, Kazakhstan’s by 7.5 tonnes, and Russia’s by 0.4 tonnes. Since 2009 other central banks from the emerging world have been steady buyers of gold but, wisely, only when offered decent quantities in the market place from the bullion banks, usually as the prices dipped. They do not chase prices or let themselves become ‘visible’ in the market place.

But Germany sold 4.2 tonnes in October. This must not be confused with lowering its holdings as a result of a policy decision. Every year it sets aside 7 tonnes of gold for the minting of gold coins. This has been a constant policy over time and will continue to be in the future. When Axel Weber was the Bundesbank President and Germany was offered the opportunity to sell 600 tonnes under the Central Bank Gold Agreement allocations, Germany refused with Herr Weber saying that “gold was a useful counter to the swings of the dollar”. Since then the gold price has risen nearly 50% in price and apart from this year’s allocation to coins Germany has sold no gold.

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Over in the States, more and more investors are turning positive on gold, with Merrill Lynch joining their ranks and forecasting gold over $2,000. While U.S. demand is not a main driver of the gold price they have added to world demand in recent weeks by buying into the funds that buy physical gold against shares they issue. Perhaps the cheapest and most liquid way to enter the gold market, these funds are designed to accommodate various types of funds that were barred from owning physical gold in the past. When they buy they hold long-term. Their current total holdings at over 2,000 tonnes are larger than China’s.

Silver – Silver is moving up in sync with gold but may well outperform it.

Regards,

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