Gold and Silver’s Daily Review for 21st Sept 2010

With currencies hardly changed initially just ahead of New York’s opening the Dollar started to slide again leaving it down on the day.   Little was added to the gold price from Asia, before London opened.   The gold price slipped $4 as a result.   The London Fix at 1,278.75 was higher than expected and was followed by a further rise to $1,280 before New York opened.

The monthly meeting of the Fed begins today.   What is awaited is a statement on whether Quantitative Easing will be resumed or not.   Yesterday’s news that the recession ended in 2009 went down like a lead balloon.   Consumers, who bore and are still bearing the brunt of the aftermath of the recession, need much more vigorous and direct support to start greater momentum in the economy, before any confidence in the recovery grows.   Meanwhile, an anemic economy leaves it wide open to many and varied crises, an environment in which gold will thrive.   U.S. long-term investors bought another 6 tonnes of gold into the SPDR gold E.T.F. yesterday having been slow to respond to the rising gold price in the last few weeks.

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Gold – Very Short-term

Gold is stronger than the market indicated before the Fix.  We expect a positive day for gold, subject to any news from the Fed.

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Silver – Very Short-term

Silver will follow higher in New York today but it too is subject to any news from the Fed.

Gold Price Drivers

When an Agency tells us that the recession ended last year and that should there be drop back to recession, it will not be a double-dip in this recession but a new one, few people are impressed.   In fact, they are irritated at the discarding of realities in favor of technical ‘spin’.   It discredits the authority of official bodies.   It also turns people away from such news and makes them focus on what they see and feel.   This will undermine consumers further and reinforce the loss of confidence we are seeing now.  Until significant action to stimulate the economy at levels that boost employment visibly there will be no increase in growth.   The Fed does not have the power to do so as it stimulates from the top, not the bottom.   With government stalemates emasculating effective government in the U.S. we doubt we will see such stimuli for a long time.  Sad to say this is gold positive!

We are of the opinion that physical demand in Europe was expressed at this morning’s Fix.   It also expressed demand from Asian and other central banks who underpinned the gold price today.

Regards,

Julian D.W. Phillips