Look to gold and silver in these uncertain times

In this uncertain world, gold and silver will continue to give such protection in extreme times, says Julian Phillips

Price Drivers

The gold and silver prices are still gathering themselves, now that the $1,300 level has been overcome. With a calmer market, traders, speculators and heavy computer trading pushes prices in line with the weakening of the dollar, using the Dollar: Euro relationship as a guide. The developed world sees the dollar’s moves against gold as a ‘counter’ to the dollar. While this is accepted in markets, there is little logic to it, for it implies that gold is moving in tandem with the euro, something with which it has no common denominator. Nevertheless, that has been the case for a long time now. It changes when strong physical demand comes in from Asia. Of course, Asians buy gold and silver with total disregard for events between the dollar and the euro or with day-to-day economic events in the U.S.

Gold & Silver really show how they ‘counter’ currencies, when a situation such as now seen in Argentina arrives. With inflation at 44%, the Peso dropping 19% in the last month and a court ruling that Argentina must repay $1,2 billion [from its remaining $28 billion of reserves] expected, in terms of international debt, the currency is in trouble. Will they default? Argentineans that hold high caratage gold have seen the value of that gold rise not only by the recovery in the dollar gold price but by the amount the currency has fallen and will fall. In this uncertain world, gold and silver will continue to give such protection in extreme times.

There were no sales of gold from the SPDR gold ETF [GLD] or from the Gold Trust, once again, leaving their respective holdings at 801.251 tonnes and 163.63 tonnes. Each day there are no sales from this U.S. source is a day confirming that U.S. sales of gold are ending. This removes a supply of around 1,300 tonnes of gold from the market, 900 from gold ETFs and the balance from Goldman Sachs, J.P. Morgan Chase and clients. With this important line of supply in 2013 now gone, demand is that much bigger than supply!   

Source