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Gold & Silver Trend Higher as Germany Cancels Greek Debt Crisis Rescue

Commodities / Gold and Silver 2010 Mar 18, 2010 - 09:56 AM GMT

By: Adrian_Ash

Commodities

THE PRICE OF GOLD in the wholesale bullion market bounced up from its second dip in two sessions to $1120 an ounce as the US opened for business on Thursday, pushing higher for Sterling and Euro buyers as world stock markets held flat.

"The equities markets have been a bit firmer," said one commodities strategist in Sydney to Reuters overnight. "That's probably taken a little bit of interest away from gold.


"It appears gold has once more been influenced by large institutional trading, which has contributed to the recent week's volatility," says a note from Swiss refiner MKS's finance division.

"Gold is turning out to be an excellent 'sideways' trade," says a note from bullion bank Scotia Mocatta. "The [US Dollar] range over the last month has basically stayed between $1088 to $1145 an ounce."

Silver continued to rise against all currencies on Thursday, once again coming "within striking distance of the $17.64 March high [and] about to break higher" in the view of Scotia Mocatta's technical analysts.

In the forex market, the Dollar re-touched yesterday's 1-week high vs. the Euro after a senior German official announced that "If Greece does need help, it will have to come from the IMF."

"Chancellor [Angela Merkel] has decided that any other solution would be legally and constitutionally impossible," says the Financial Times.

Greek prime minister George Papandreou meantime told European lawmakers in Brussels today that Athens' austerity package – challenged by street protests and two national strikes this month – already match International Monetary Fund requirements.

"We are not going to default...We are saying that we don't need this money."

Falling to $1.3650, the Euro dropped to a fresh 3-week low versus the British Pound at near 89 pence.

The gold price for Euro investors rose to a 1-week high of €824 an ounce, up by more than 16% since the Greek budgetary crisis broke in Nov. '09.

Over in the United States, Thursday morning brought mixed economic data to Wall Street, where stocks and bonds both opened the day unchanged.

The Consumer Price Index was flat in Feb. from Jan., rising more slowly than analysts forecast at 1.3% per year excluding food and fuel items.

Continuing Jobless Claims showed a slight fall. The current account deficit for the last 3 months of 2009 was revised to a smaller-than-expected widening.

"Gold will likely be kept firm into 2010 and 2011 by a relatively weak greenback, record-setting US fiscal deficits, rising inflation concerns and higher jewelry demand, which has been hit hard by the recession," reckons Bark Melek, global commodity strategist at BMO, the $373 billion asset manager based in Montreal.

"Gold is an excellent hedge and will remain stable...The end to producer hedging, central bank net buying after a very long pause, and concerns that excessive US and European government debt may lead to future monetization are additional key drivers for the outlook."

Melek is more bullish still on silver, however, noting that new supplies were flat in 2009.

"With demand for industrial silver rebounding sharply in 2010, likely around 19% as global industrial activity and auto production move into recovery mode, supply/demand fundamentals look set to tighten materially in 2010."

"Gold and silver prices should, in our view, trend higher over the next few quarters," agrees the latest Commodities Review from French bank Société Générale

"We expect investor buying of gold and silver to continue as inflation fears are likely to increase on strong economic growth in emerging economies and on concerns that developed countries may be tempted to monetize some of their large amount of sovereign debt."

By Adrian Ash
BullionVault.com

Gold price chart, no delay | Free Report: 5 Myths of the Gold Market
Formerly City correspondent for The Daily Reckoning in London and a regular contributor to MoneyWeek magazine, Adrian Ash is the editor of Gold News and head of research at www.BullionVault.com , giving you direct access to investment gold, vaulted in Zurich , on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2010

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.


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