Gold & Silver Market Morning, October 27, 2011

The solution put forward by the E.U. after an all-night meeting was thought, if positive to have an undermining impact on the gold price. The day in Asia started with the gold price at $1,725 [and in the euro at €1,286.33] with the euro at €1: $1.3947.

Once Europe opened after receiving the news of the Eurozone debt ‘solution’ the euro rose to €1: $1.4022, gold slipped slightly to Fix in London at $1,708 and in the euro at €1,219.739 while the euro was at €1: $1.4003.

Thereafter the euro rose slightly to €1: $1.4029 and gold began to rise ahead of New York’s opening to $1,720.05 and in the euro at €1,226.07.

After Fixing in London at $33.55 the silver price moved slightly stronger, ahead of New York’s opening to $33.64.

Gold _{(very short-term)}

The gold price should have a volatile but strong bias, today in New York.

Silver _{(very short-term)}

The silver price should have a volatile but strong bias, in New York, today.

Price Drivers

During the night the E.U. lawmakers agreed on what on the surface looks like sufficient resolution to the Eurozone debt crisis to convince markets that the sovereign debt crises will be resolved. The announcement was a broad one with not so much detail, which we expect in the following days. The expectation that the bailout fund will rise to $1.2 trillion based on guarantees [more debt], which if economic growth supports the story will be sufficient to bailout Italy as well, should the need arise. Does this solve the causes of the crisis in the first place or is it like a failing business that has just received another loan? If economic growth rises then the debt will be manageable, but if not this is just a postponement. It is clear that the European fiscal union is the only way forward to postpone the crisis for longer, but solid, sustainable, economic growth together with a savage cutback in government spending and fiscal deficits is needed to really correct the situation. With the emerging world sucking developed world wealth and growth to the east there is little evidence or prospect of evidence of that, nor is there likely to be in the future. This underlying current continues to endanger the currency system ruling financial markets across the world. Until we see that resolution, we can expect gold to continue to attract new and robust demand.

Certainly, while today sees a drop in Indian demand because they are celebrating Diwali [festival of lights], total Asian demand remains unabated. The falls in gold prices and the gold that came onto the market was absorbed by central banks and Asia, so when developed world demand appears, there is little stock available to feed their appetite. Hence the dramatic price rises we are seeing now. We look at those factors and more on an ongoing basis in our newsletters, so we ask you to please subscribe through www.GoldForecaster.com or www.SilverForecaster.com.

Regards,

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