Gold and silver market outlook

Gold prices rose 3 € and $ 2 as the euro weakened slightly to $ 1.3766. It was fixed in London at $ 1,409.75 and € 1,024.08, not much movement since yesterday. The consolidation process continues.

There is a change in the markets that we are seeing and across all markets, globally. The issue of inflation from food and energy is placing pressure on central banks to raise interest rates. However, there is a continuing need to keep interest rates at a negative real level, so that the Treasury [in the U.S.], Gilts [in the UK] et al, do not start to tumble. Governments cannot afford to allow rising [to real levels] interest rates to squeeze growth, which is still quite limp. Nor can they allow fixed interest markets to tumble as rates rise. This puts them between a rock and a hard place, making even cash uninteresting as it fails to compete with inflation. It leaves precious metals still favored as they rise in inflationary as well as deflationary times.

Gold – Very Short-term

Gold is now close to the bottom of its trading range but may well see some more weakness today. At best it should hold around these levels in New York today.

Silver – Very Short-term

Silver is trading at $34.48 and may well slip some more today in New York. At best it should hold these levels.

Gold Price Drivers

The noises coming out of the EU meetings supposed to resove the Eurozone crises are discouraging to say the least. German national interests keep dominating those of weaker EU member states solvency issues. Failure at these meetings will bring the Eurozone debt crisis back to center stage and weaken the euro. With the U.S. in a similar position [but with a politically and fiscally unified nation] we expect the world’s two most important currencies to continue losing value. This may well not be reflected in their exchange rates against each other continuing to give the appearance of stability.

More on the points made at the start of this review;

We have reached a point in financial markets when governments have been placed in a position where they do not have the options needed to rectify the financial system’s woes. Unless there is the political will to place national interests below those of global ones, the way forward can only lead to more problems. The very structure of democratic politics prevents politicians from moving down a path to global financial reformation.

This will be illustrated at the end of this month when the EU addresses their own sovereign debt crises. For example, the Irish will be asked to raise their attractive Corporation Tax levels to the level of other member states. If they do this Ireland is unlikely to be attractive to businesses and so fail to repay the debt they will have to repay the EU. We discuss this further in the next issue of the Gold Forecaster and the Silver Forecaster.

[The Gold Forecaster and Silver Forecaster are a “must-read” for all who want to understand why the gold and silver prices are moving as they are and why.] Subscribe at www.GoldForecaster.com or for silver at www.SilverForecaster.com].