Europes Bad News Pushes Gold Up

April 28, 2010 | By | Reply More

Spot Gold is hovering around $1164 an ounce just before the New York opening this morning. If gold is breaking out then this week’s news is certainly helping it on its way.

The bad news from Europe, with Greece relegated to junk bond status and the spotlight turning on the other Euro land basket cases, not to forget the British pound, has resulted in a strengthening dollar.

In normal times this would mean that the gold price would move in the opposite direction but that well established link has fractured as gold has moved out of its last two week range bound $1140-$1150 to this mornings price.

We will shortly let you know what the US market thinks of this at the open. In the meantime we should keep in mind that just because the dollar is looking strong it is because the other major currencies, namely the Euro and the GB pound, are weakening by the day.

Many of us think the same applies to the dollar but at this moment in time it is relatively stronger against these two.

Of the other principal players the Japanese yen seeks its own pathway against the greenback and the world waits with bated breath for the Chinese to revalue the Renminbi (yuan) in line with its real underlying strength. If, or more likely when, that happens watch out you don’t get trampled under foot in the rush for gold.

Another link that has fractured is that, for this week so far, the silver price movement has not mirrored that of gold. In fact earlier today you could buy silver for $17.85 an ounce, an opportunity we could not resist!

However, short of market manipulation theories and option covering on Friday (April expiry day) we are short of a sound theory to explain the behavior of silver. For those in doubt we are firm in our belief that this is only an anomaly we cannot explain and that the silver price will return to its proven link with gold.

Early days yet but at the NY open spot gold was trading up at $1168 an ounce while, surprise, surprise, silver is looking hesitant at around $17.90 an ounce. Today is shaping up to be an interesting time for precious metals.

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