Gold & Silver Market Morning, March 12 2012

After New York closed at $1,711 Asia at week’s beginning at first saw gold move to $1,713, but London took it down to $1,706 as the euro slipped back to just above €1: $1.31. The morning Fix in London set it at $1,705.25 and in the euro at €1,299.931 up €14 higher, while the euro stood at €1: 3118. Ahead of New York’s opening it stood at $1,704.15 and in the euro €1,299.99 while the euro was at €1: $1.3109.

Silver slipped back in line with gold to just under $34 in London. Ahead of New York’s opening it stood at $33.92.

Gold _{(very short-term)}

Gold is expected to tighten its consolidation range before a large move, in New York today.

Silver _{(very short-term)}

Silver will tighten its consolidation range before a large move, in New York today.

Price Drivers

At week’s start, the final acceptance of the Greek bailout package is being completed. Private bondholders who refused to accept the offer from Greece will get a 100% payout from their Credit Default Swaps, setting a dangerous precedent for any future situation in another country. For E.U. leaders the key achievement is the prevention of a full blow banking crisis. Few believe that Greece can avoid a full default at some point in the future. But gold and silver investors should not just focus on the Greek situation but on what the European quantitative easing mean for the value of the euro. Well managed currencies have risen in value while the value of both the dollar and the euro have fallen. But the damage done to well managed currencies as they rise in value precipitated the weakening of those currencies, so as to keep international competitiveness. But this has defeated the wisdom of managing an economy in a prudent fashion. This has left currencies an unreliable measure of prices. We see this reflected in part in the price of oil now and in the rising prices of silver and gold. Will this change? No, the priorities of European Union members will swing to promoting growth which implies more currency weakening [alongside the U.S. dollar].

We reiterate what we have pointed out before and that is that there is a reduction in systemic liquidity that demands freshly printed money to fill the gaps left by these deflationary influences. ECB President Mario Draghi gave banks more than €1 trillion ($1.31 trillion) of three-year loans in December and February. Until deflation is turned back to growth, this process will continue. As the oil price rises, so that deflationary influence persists, sucking money out of countries that import oil. The entire process is gold positive. More than that, the process itself throws doubts of the system’s ability to retain value or stability. Gold and silver become retreats from the uncertainty spawned by these dangers. There is no sign of a change in system needed to give currencies dependable values. [To get more of the right perspectives on the gold and silver markets and where gold and silver prices are going, subscribe through www.GoldForecaster.com or www.SilverForecaster.com].

Regards,

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