Gold silver likely to consolidate in US trade after sharp falls

The Fed is caught between a rock and a hard place as it weighs convincing growth and ongoing deflation.

Gold Today –The gold price in New York fell to $1,226.50 down $36.00 on Thursday then Asia lifted it to $1,229.10 ahead of London’s opening. London took it lower to around $1,223.00 ahead of the Fix, which was set at $1,222.75 down $32.50. In the euro it Fixed at €891.217 down €20.83. Ahead of New York’s opening the euro stood at $1.3724: €1, stronger by nearly half a cent against the euro with gold ahead of the opening in New York at $1,227.65 and in the euro at €894.53.

Silver Today – Silver was pulled down heavily to $19.52 down 78 cents or nearly 4% in New York. Ahead of New York’s opening, it traded at $19.57.

Gold (very short-term)

The gold price should continue to consolidate, in New York, today.

Silver (very short-term) 

The silver price should continue to consolidate, in New York, today.

Price Drivers

There were 6.001 tonnes sold from the SPDR gold ETF but there were no sales from the Gold Trust yesterday. The SPDR gold ETF holdings now stand at 827.604 tonnes and the Gold Trust holdings at 167.90 tonnes. The event waited for in the U.S.A. is the Fed’s decision on whether the economy is sufficiently robust to trim back Quantitative Easing by $15 billon from the monthly $85 billion money printing program. By robust we mean that the economy must be able to continue growing despite rising interest rates. While the U.S. economy is growing at a modest to moderate pace we ask, “Is it sufficient to weather the storm that will inevitably hit Bond markets, Housing markets and the consumer at ground level?” We believe that this will decide the timing of a reduction of QE. To us the low inflation level tells us that the main achievement of QE is the staving off of deflation. So the Fed is caught between a rock and a hard place as it weighs convincing growth and ongoing deflation. On this basis it is clear that there will be fewer mistakes by waiting longer than acting too early.

The dollar paused today in its downward path and was holding at $1.3753 to one euro. We see it waiting for the FOMC meeting next week before deciding its direction.

It is becoming clearer by the day that India is close to easing or lifting it regulations on gold imports. We may have to wait until 2014 when such an easing could garner the most votes, but we believe they are working on this now. It is difficult for people in the developed world to understand just how important to the Indian culture gold is. In short, it is the bride and her family’s way of providing working capital to the new family. In addition, Hindus link it to their gods. And those two facets take gold to a far higher plane than it sits on in the developed world. Politically it is a very hot potato. But we base our thinking on certain government activities we are seeing now.

Silver – The silver price fell 1.2% more than gold in expected fashion.

Julian Phillips is the founder of and

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