-- Posted Tuesday, 27 September 2011 | | Disqus

And a bounce is underway!   Asia started the move and took it to $1,636 before London picked up the baton and lifted it through $1,656, before the Fix stamped its authority on the price and Fixed it at $1,671.00.  In the euro it was Fixed at €1,236.404 while the euro traded against the U.S. dollar at €1: $1.3515.  Thereafter, in London it rose further ahead of New York’s opening to $1,630 and in the euro €1,205.30.  Ahead of New York’s opening it stood down at $1,667.50 with the euro at €1: $1.3546 leaving euro gold at €1,230.99.

Silver continues to shock its followers, having traded at $28.93 rose to $32.73 up nearly $4 overnight. This bounce is a natural reaction and should be restoring faith in the metal. Ahead of New York’s opening it stood at $33.20 up $4.27.

Gold _{(very short-term)}

The gold price should continue to bounce.

Silver _{(very short-term)}

The silver price should continue to bounce.

Price Drivers

There doesn’t seem to be a day without some more crisis pressure. On Thursday Angel Merkel has to achieve parliamentary support for Germany’s backing of the Greek debt crisis. The present mood at ground level is not to give such support. If Germany fails to give support, investor confidence in the Eurozone would be shatters and its debt crisis morph into a global banking crisis quickly. We are of the opinion that Greece should have defaulted a very long time ago for its own case and that of the Eurozone.  We also believe that it is just about inevitable that Greece will default. It is also clear that the funds needed to remove the crisis are vast and if based on debt, unlikely to be repaid in a decade or more. That way, though would give time to right off debt and feed in newly printed money.   But what would that do to the value of money. It actually seems quite sensible to write off debt [50% of Greek debt to begin with] then issue new money to fill the hole that is left, but life is not that easy. It is a matter of repeated history that it is liquidity crises that cause hyperinflation. Developed world debt is excessive and the plan needed to repay it has to allow inflation to jump. This will be good for the gold price. If austerity is the way forward the developed world will wane for more than a decade of falling consumer wealth and social unrest. This will be good for the gold price as well.

As to the gold price meanwhile, the present global economic situation is dire and the value of national currencies is dropping slowly but surely. The pullback in the gold price was not a reflection of the shape of the gold market fundamentals, which will dominate longer term.   Silver rose nearly $4 yesterday after falling that amount the day before.   That’s 15% in a day.   This is about volatility, not fundamentals. Continuing financial crises will make all equity markets extremely volatile, so precious metal investors have to keep their eyes on the overall picture, not on the day to day details.  

We are looking at this prospective future in the next issues of the Gold Forecaster and the Silver Forecaster where you can get a more complete perspective on gold and silver so subscribe now!  

Regards,

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

-- Posted Tuesday, 27 September 2011 | Digg This Article | Source: GoldSeek.com

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