The media reports that the Japanese yen and the Swiss franc are moving to new peaks today. In fact the euro, the U.S. dollar and sterling are falling to lows against these currencies. Gold in turn is holding above $1,400 having Fixed at $1,403.50 and €1,069.90 and reaching a ‘new high’ in sterling at £912.43 this London morning.
It is not so much that tragedies are unfolding out there it is that there are so few real attempts to structurally change the situation causing the damage. But these currency problems only affect the developed world’s and central bank’s view of gold.
In Asia demand for gold reflects more people with income available for investment, which continues to grow day-by-day. The currency crises of the developed world are acting as a deterrent to investing savings in the developed world and encouraging these newly enriched people to stay with what they know and what has worked for them to date.
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Gold – Very Short-term
The gold price is rising well in the euro and we expect that it will do so today in New York.
Silver – Very Short-term
The silver price is very strong and expected to remain so today in New York.
Gold Price Drivers
While the Swiss franc is at a high, we are of the opinion that the Swiss National Bank, Switzerland’s central bank will act to persuade their currency to fall. They did it once before by lowering interest rates and will do so again. Of course the Swiss franc deserves to be so high, but at these levels their manufacturing and industrial sectors are suffering. Eventually a central bank and the government do act in the interests of their local economy, as we have seen evidenced in all the world’s economies. Japan has already said that it will intervene to stop the yen appreciating.
The morality of complaining that one currency is keeping its exchange rate low goes down like a lead balloon, when push comes to shove. It is simply a ’cause for war’. So far, we have seen only complaints but no action on this front. With the decay growing, we expect 2011 to see considerably more action in foreign exchanges. With no sign of constructive action on these fronts, we expect friction to heat up.
In the next few issues of the Gold Forecaster and Silver Forecaster we will be looking at the path ahead for gold and silver. We will also publish reports on companies like Coeur d’Alene [silver and gold] and other attractive junior mining companies in the gold and silver worlds. We recommend that you subscribe or continue to subscribe to these newsletters to be ready for the gold and silver markets in 2011.
Regards,
Julian D.W. Phillips