So far this week we have witnessed a U.S Dollar that has gained and maintained strength based off
last Friday’s much better than expected unemployment data. The Labor Department issued reports stating the U.S unemployment number dropped from 10.2% to 10.0% showing significant signs the economy is stabilizing. This led to an avalanche sell-off that extended through Wednesday’s trading session. Much of the selling was due to the huge amount of Long positions liquidating and taking profits. There have been reports of record net long positions on the Comex exchange (in access of 300,000) and with Gold trading at all time levels I believe investors were concerned with the unchartered territory and at the first sign of either Gold weakness or U.S Dollar strength they were going to liquidate and escape the volatility.

Despite a $100.00 + pull back the World demand for physical precious metals is still soaring. Recently the United States Mint announced its supply of Buffalo 1 ounce Gold Coins was DEPLETED… We also have reported there is still a great demand by the jewelers of India to purchase Gold as their wedding season continues through January. High prices have been the reason for sluggish sales however, they have lots of interest should we dip around $1100.00 per ounce.

Also Wednesday President Obama said staggering job losses mean the United States must continue to “spend our way out of this recession” with a incentives for hiring…He also revealed the continuation of TARP
(Troubled Asset Relief Program) for America’s small business… His objective is to help create jobs for the 7 million Americans who have lost jobs.

Much of this Gold and Silver rally is contributed to the U.S Dollar weakness versus “the basket of currencies”…Primarily “it’s been all about the Dollar”. So it should come as NO surprise that any positive U.S Dollar news is going to cause ‘PANIC’ amongst the Gold Bugs….especially the “BUBBLE Theorists”…
The truth of the matter is the Dollar has struggled to maintain its momentum virtually all year. The international community, central banks, and entire governments are all looking to increase their Gold reserves in preparation for pending inflation. The Worlds largest producer of Gold is China…They are not only producing large amounts …more importantly they are not exporting any. Instead they are advising their citizens to purchase both Gold and Silver to protect their new found wealth… (Their middle class is ever growing)………. This is known as Supply and Demand……Look who is the largest producer (China) and then look who will soon surpass India as the largest consumer…yep… (China). Fifty years ago any citizen caught with Gold or Silver in their possession were imprisoned. These precious metals were considered state owned property….Times sure do change.

Mike Daly / Gold Specialist

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