Gold and silver have both made something of a recovery after their sharp falls last week - the question is whether this can be sustained in the short term or whether we are due another fall.
NEW YORK In a sign that much of the market feels that perhaps the sharp fall-off in the gold price - and also that of silver in particular - may have been overdone, the prices picked up a little on Friday to well above their low points, and carried on moving upwards Monday morning in Asian and European trade. Gold moved back above the psychological $1500 level, while silver rose by a bigger percentage- as might be expected following its huge fall in percentage terms - to back over $37.
As we have pointed out before here, virtually all the politico-economic factors which have moved the gold price higher and higher remain just as strongly in place - if not more so given the seeming escalation of the financial crisis in Greece, while one has a strong feeling that defaults in U.S. cities and States are not far away now, which could give another boost to the upwards spiral.
Despite the Eurozone problems, the U.S. dollar still looks weak against other major currencies as other Central Banks are seen as more likely to raise interest rates than the U.S. and some of the recovery so far today has been due to the dollar resuming a downwards path after a very minor recovery last week. Mexico's gold purchases in February and March (we don't know yet if the country continued purchases in April) should help underpin the price revival - while Asian buying seems to be continuing apace.
As to where the gold and silver prices go from here in the short term this is largely dependent on the U.S. market today to either confirm the rally or put an end to it. Ultimately though gold does look poised to continue rising, even though it can show weakness in the summer months - a view taken even by many among the more objective analytical community. Silver is a bit more of a conundrum and will definitely remain much more volatile. There are hugely conflicting views on silver supply. The tendency has been for silver to rise faster than gold when the latter is on the up, and crash much faster and farther when gold falters. One has to doubt whether the gold:silver ratio will quickly get back to the low 30s given the number of speculators who have had their fingers burnt in the past week's dramatic fall. It is currently at 40 at the time of writing.
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