Daily Market Update 2/22/11

GOLD

From last Friday’s closing price, Gold was up $13.50 today, closing at $1401.10, on very heavy volume. This is above the very important psychological level $1,400.

At the top of the news effecting Gold and crude oil prices is the ongoing protests in Libya.  Libya exports some 1.1 million barrels of crude a day from a production of 1.6 million barrels, and has the largest proven oil reserves in Africa. Therefore, any supply interruption from Libya could cause temporary shortages until other OPEC countries increased shipments. The deterioration in the Middle East political situations is driving investors into gold, the most popular safe haven during times of instability.

SILVER

Silver closed today at $32.86 up $0.62 on the day, another 31 year high. Demand is continuing to increase both domestically and throughout the World.  The Backwardation I mentioned last week is increasing as prices move higher. The main impetus for Silver is inflation; food and commodity inflation continues to be of great concern. Remember, many of the demonstrators in Egypt and Libya were complaining about the 15-20% increases in food.

Other Important News:

The situation in Madison, Wisconsin should be of great concern to all of us.  28 states have budget deficits that need to be balanced and the issue of Union’s Collective Bargaining, and the salaries and benefits of civil servants, will be in the forefront for quite a while.  As commodity inflation works its way into food and staples prices I anticipate Unions, on behalf of their members, will be asking for wage increases to keep up with the cost of living index.