-- Posted Monday, 1 August 2011 | | Disqus

New York closed at $1,626. Then Congress struck a loudly hailed agreement.   We forecast a pullback to between $1,600 and $1,610.   In Asia and London the pullback came to $1,615 after which the morning Fixing in London was set at $1,613.50 and in the euro at €1,117.54.   The dollar then slipped to €1: $1.4432 [two cents lower], to Yen 76.92 and in the Swiss Franc to 0.7831 all new lows.   World currency markets were unimpressed by the debt ceiling deal!

Just ahead of New York’s opening, gold continued to rise to $1,618.65 and in the euro to €1,122.35 up €5 on the day.  

Silver was Fixed at $39.31 barely changed on Friday’s Fixing.   After the Fix it began to rise through $39.40 ahead of New York’s opening  

Gold _{(very short-term)}

The gold price may have a weaker bias as the crisis premium is removed, provided Congress signs off on the deal.   If not, expect gold prices to rise.

Silver _{(very short-term)}

The silver price may have a weaker bias as the crisis premium is removed, provided Congress signs off on the deal.   If not, expect silver prices to rise.

Price Drivers

A deal was struck, but must first be signed off, before it is done.   It came in at less that half than was thought necessary.   It does not cut the deficit nearly enough to convince the world that the U.S. is on top of its debt problems.   In fact the market expects the debt to GDP ratios to remain at 100% and the Fed deficit to remain at 10% for the next decade.   To call a spade a spade, the deal is testament to the failure of the U.S. government to overcome its monetary future.

With very poor and declining growth in the U.S. the clock has started to tick on an economic and financing time bomb that will explode unless some very dramatic changes in growth and U.S. political management are put in place.   After the political performance, we have watched for the last couple of months, this seems unlikely.    We will discuss how long the bomb has been set for, in the next issues of the Gold & Silver Forecasters in the next and coming issues.

Nothing has happened this week that injected confidence into the monetary system that warrants the selling of gold.   Indeed, the political exercise has not been the greatest advert for effective government ‘surpassing all others’.  In fact it has laid the groundwork for the next financial crisis.   The erosion of foreign confidence in the financial system of the U.S. is, we believe, irreversible.

Regards,

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

-- Posted Monday, 1 August 2011 | Digg This Article | Source: GoldSeek.com

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