Overnight gold fell through support and to below $1,659. London took it back up slightly to $1,660 before the Fixed which was set at $1,665.00 and in the euro at €1,262 while the euro stood at €1: $1.3191. Ahead of New York’s opening gold held at $1,666 area with the euro at 1€: $1.3191 leaving the gold price in the euro at €1,263.31.

The silver price opened strong and steady at $31.38. It slipped to$31.30 ahead of New York’s opening.

Gold (very short-term)

The gold price should have a steady to weaker bias, in New York today.

Silver (very short-term)

The silver price should have a steady to weaker bias, in New York today.

Price Drivers

The Eurozone agreement will fail. This represents several banks expert opinion. This is because the agreement in the E.U. offers no explanation of how, precisely, the German current account surpluses will be recycled to where they are needed in southern Europe. We doubt Germany will want that to happen at all. As German popular opinion has been saying all along, why should their hard work be used to pay the bills of people who do not work or save as hard as they do? But why is gold falling? We are publishing an essay on this shortly in our newsletters. [Subscribe through www.GoldForecaster.com or www.SilverForecaster.com to our newsletters on these subjects.]

Liquidity and solvency problems in the European banking system continue. Cumulative outflows from the euro last week were twice the average in the same period last year. Dollar funding costs for European banks increased after the summit amid concern the measures won’t be enough to stem the crisis. The three-month cross-currency basis swap, the rate banks pay to convert euro payments into dollars, ended last week at 122 basis points below the euro interbank offered rate, from 117 basis points the day before. The measure reached 163 basis points on Nov. 30. Looser policy from the ECB “may accentuate the process and continue to force the euro lower and dollar higher, in due course. The market is reaching a consensus that there aren’t going to be many upside factors for the euro at this stage and if Draghi is thinking of further rate cuts, it just adds to pressure on the euro.

Meanwhile gold is under pressure with the general fear that the Eurozone crisis will worsen and is beyond the ability of the politicians to control. After all, last week’s E.U. summit was scheduled to resolve the crisis. Its failure to do so points to considerable financial turmoil. We are waiting for more commentary from the ratings agencies which will impact the market across the developed world!


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