Daily Bullion Market Update 9/07/11
By Barry Stuppler – MintStateGold.com
Long term owners of Gold need to understand and accept the increased volatility in the Gold price. We saw a run up to $1,921 early Tuesday morning and a sell off to $1,791 in early Asian trading this morning, before significant buying came into the market. In Asia, a 4,000 lot of gold contracts (400,000 oz) was sold into the market, dropping the price by $50 an ounce in five minutes. Now, the talking heads are saying gold made a double top and should correct to $1,700 per ounce, while Tuesday morning they were saying gold would be over $2,000 by month end.
Nothing has changed in the gold fundamentals. If anything, the fundamentals have improved with the Swiss Franc (another safe haven) taken out of play when the Swiss National Bank announced a cap of 1.20 franc value against the euro. The only thing that has changed is the increased price volatility and trading volume. Tuesday, gold trading volume was extraordinarily high, twice the best day last week.
At 11am PDT Gold is trading at $1,823.20, down $46.50 per ounce on very heavy volume. Gold showed excellent support at the $1,800 area this morning. The U.S. Dollar has been strong, trading at $1.40 versus the Euro.
Silver’s price action yesterday was disappointing. When Gold was setting a new high of $1,920 per ounce, Silver couldn’t break above $43.40 per ounce. Today, Silver is showing much more support than Gold. When Gold broke below $1,800 briefly, Silver stayed above $40.24, an important resistance price.
Now with Gold at $1,823, Silver is trading at $41.65 per ounce at 11am PDT on heavy volume; very impressive price support since Silver is only down $0.23 from yesterday.
Eurozone Debt Update
The Eurozone sovereign debt crisis is heating up. Italian and Spanish trade unions have mobilized for anti-austerity strikes, as their governments tackle the Euro debt crisis.
The Italian prime minister’s office has proposed an austerity package that would increase the value added tax to 21% from 20%; charge a 3% wealth tax on Italy’s top earners, and the introduction of a later retirement age for women.
There are fears that the International Monetary Fund, the European Central Bank, and the EU “might refrain from disbursing Greece’s second bail-out package” because of that country’s failure to meet the austerity targets, set as a precondition for the initial bailout package.