-- Posted Monday, 25 October 2010 | | Source: GoldSeek.com
On the assumption that the G-20 would, for a change, produce something that would restore confidence in the currency world, traders hit the gold price hard on Friday sending it down through support to as low as $1,314 at one point. We believe that this was a shorting exercise.
What did come out of the G-20 meeting was an agreement not to indulge in competitive devaluations. We will wait to see that before we believe that. It is difficult to see a politician winning an election in the face of keeping his currency high at the expense of the national economy. The U.S. denies that QE is part of this albeit indirectly so. Are Japan and China are the main culprits only? Japan agreed to follow this line, Chine has not. There can be no enforcement of this ‘intention’, so the agreement did not convince anyone.
We may well see the Yen lie on the sacrificial alter this week and head towards 78. It is already just above 80 Yen to the U.S. dollar, an historic 15-year high. The globe’s foreign exchange markets delivered their judgment on the meeting. They dropped the dollar against the Yen, which stands at 80.46: $1, the euro at $1.4033: €1 and the Swiss Franc at 0.9688: $1 before New York opened. The markets are telling us that the meeting was ineffective and currency chaos remains on the agenda. And what of Gold? At the morning Fix gold fixed at $1,345 up $30 from its last week’s low.
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Gold - Very Short-term Gold should digest the G-20 meeting and consolidate to go positive as the shorts are squeezed.
Silver – Very Short-term Silver should follow gold and wait until the G-20 news is properly digested. We expect silver to consolidate and recover.
Gold Price Drivers
Each time finance ministers and central bankers, the men on whom the currency system rests, make statements that hold no water confidence in the system is chipped away again. Traders saw the G-20 meeting as an opportunity to take short positions. We believe the meeting will see them reverse their positions. Volatility is here to stay, but just remember to look at the percentage move not the actual dollar move.
Meanwhile, central bankers and large investors, intent on enlarging physical gold positions continue their policies of ‘limit buying’. If lower prices give rise to larger offerings of gold, they restrain themselves, but if it takes higher prices to yield good volumes that will be the way they go. They just hope that more central banks with less restraint don’t crowd the market place.
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Regards,
Julian D.W. Phillips
-- Posted Monday, 25 October 2010 | Digg This Article
| Source: GoldSeek.com
