-- Posted Monday, 18 October 2010 | | Source: GoldSeek.com
We are of the opinion that there have been some support operations for the U.S. dollar as it has recovered in London to $1.3892 from over $1.41. The question one has to ask is, “will support operations for the dollar be successful?” To date the support operation for the Japanese Yen has not as it now stands at Y81.28 to the dollar. The fundamentals of the dollar will dictate that it fall lower, but pragmatism dictates that all central banks can do is to soften the fall in time and volatility. They hope that global trade and capital flows can live with this. We still expect the dollar to fall to the $1.50 level. Of course, global trade will do what it can with what it gets, but surplus holding nations are not bound by such needs and are diversifying away from the potentially weak currencies. Support operations allow them to dump much bigger quantities of weakening currencies, which they will do.
The full impact of QE 2 will not be felt until it is underway, but the downward pressure on the dollar will persist well ahead of that day.
Meanwhile gold fell overnight in Asia down to $1,354 an ounce before recovering in London the Fix at $1,359.75, which better reflects global demand excluding the U.S. The p.m. Fix is the best reflection of global demand.
Apart from covering the gold markets Gold Forecaster and Silver Forecaster are structured in a way that addresses macro-economic factors from oil to currencies covering the pertinent gold markets that directly affect the gold price and some that simply influence it. It is a “must-read” for all who want to understand why the gold price is moving as it is and why. It also aims to help you understand why currencies and today’s national economic problems are influencing the global economy and the precious metal prices [we cover platinum in the Silver Forecaster too]. It is vital to understand these subjects so as to be able to profit from the behavior of the gold, silver and platinum prices.
Gold - Very Short-term
Gold should consolidate today subject to new news.
Silver – Very Short-term
Silver should consolidate today, subject to new news.
Gold Price Drivers
We have mentioned several times that central banks and other major buyers aim to pick up gold without chasing prices. When they buy local production [as is the case with Russia and China at the moment] they pay their producers the market price and that supply never reaches the open market, so does not affect the daily price directly. Likewise ‘limit’ buyers say they will buy gold at a certain price and wait for the offer and buy when it comes to them. This drains the market of gold without affecting the gold price. When retail buyers and in particular U.S. buyers who buy on either some move by the Fed or other gold-affecting macro-economic news or when they see the gold price about to rise, they find they have to pay higher prices to get the gold they want. This provides those short-term spikes as they take what there is and often force ‘naked’ short sellers to close their short positions. [Any reader who needs explanations of terms we use here, please ask through gold-authenticmoney@iafrica.com]
In the last week we have seen U.S. gold Exchange Traded Funds selling positions as the price corrected and so providing the big buyers with the gold they seek. Subscribe to Gold Forecaster if you wish to better understand the gold market.
Regards,
Julian D.W. Phillips
-- Posted Monday, 18 October 2010 | Digg This Article
| Source: GoldSeek.com
