by Alasdair Macleod, Gold Money:
This week started with a severe markdown in gold and silver prices when markets opened in the Far East on Monday morning, taking gold down $12 to $1278 and silver only 12 cents to $19.03. The clue in this was the resilience of silver, which hardly moved: it was an attack on the gold price presumably designed to take out stop-losses.
From there precious metals never looked back. Interestingly, for the first time in a long time, prices advanced in London dealings, indicating they were being driven more by physical demand than trading in US futures. This is hardly a surprise given that GOFO is still negative for up to three months forward and has been in backwardation every day since 3rd April.
The sharpness of the bounce in the gold price is shown in the chart below of gold and silver prices for the year so far. Given the short-term bearishness of some of the major banks one can only conclude that there is an underlying firmness in these markets.
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