Gold and silver are tentatively higher after their 2% and 8% falls yesterday. In silver, speculators on the COMEX continue to liquidate on mass after margin was increased a massive 84% and various stop loss levels are hit, leading to further falls in the futures market.
Cross Currency Rates
Absolutely nothing has changed regarding the fundamentals driving the gold and silver markets and this will likely be another correction in gold and another sharp correction in silver.
Gold and silver's rise is likely to continue until we return to a world of healthy economic growth, low inflation and positive real interest rates.
Gold in US Dollars - Bloomberg Adjusted for Inflation 1971 to 2011 (Monthly)
It is important to put the falls in gold and particularly silver in context and as ever focus on the long term. The long term inflation-adjusted charts put the gold correction and silver crash (above and below) in perspective and show both as being buying opportunities again. Although buyers should consider dollar cost averaging into position in order to mitigate any further price weakness.
With macroeconomic, monetary and geopolitical risks remaining high - including the threat of terrorism and war - safe haven demand from investors, pension funds and central banks is likely to continue.
The usual gold and silver bubble callers are out in force once again and it is interesting how there appears to be more coverage of gold and particularly silver now than there was with prices rising in 2010 and early 2011.
Silver in US Dollars - Bloomberg Adjusted for Inflation 1971 to 2011 (Monthly)
Indeed, mere rumours that Soros may have sold some of his gold and silver holdings led to massive media coverage.
The fact that John Paulson and a number of other increasingly respected hedge fund managers still own massive gold positions and are not selling did not receive as much coverage as the rumours of Soros selling some of his gold.
John Paulson told investors at a breakfast on Tuesday that he expects gold to hit $2,500/oz to $4,000/oz in the next three to five years.
Also, the massive gold accumulation by Mexico, Russia and Thailand was barely reported in the non-specialist financial press, nor was reported the news regarding Portugal being urged to sell its gold by senior German lawmakers.
Silver's sell off has been vicious but value buyers continue to accumulate silver bullion. Jim Rogers, who arguably has a better track record than Soros in recent years, remains bullish on gold and silver and told CNBC, "if it goes down I hope I'm smart enough to buy move silver."
Other widely followed and respected investors with expertise on gold and silver such as Peter Grandich and Jim Sinclair are also relaxed about the falls and remain bullish on gold and silver due to the continuing strong fundamentals.
Also, there are reports this morning from the Wall Street Journal and Mitsui that there was decent buying of silver from China at these price levels overnight.
Gold is trading at $1,483.82/oz, €1,021.42/oz and £903.61/oz.
Silver is trading at $34.18/oz, €23.53/oz and £20.67/oz.
Platinum Group Metals
Platinum is trading at $1778/oz, palladium at $708/oz and rhodium at $2,250/oz.