Daily Market Update 4/6/11

GOLD

Up, Up and Away

Gold hit another all-time high of $1,463.70 this morning, closing the day at $1,461.50 per ounce, up $8.10 on the day. Gold traded actively in the worldwide market on heavy volume, showing excellent support and demand for Gold at the higher prices. 

I am amazed to hear one market analyst after another say that raising global interest rates is a bearish sign for precious metals.  In the face of the recent ¼ percent raise in China, and higher government rates in Europe and the U.S. on the horizon, gold and silver continue to set new highs. Governments slowly raise interest rates as an attempt to slow down an overheating economy because they are concerned about inflation. I remember back in 1977/80 when gold and silver were setting new highs; Gold over $800 and Silver over $50. U.S. interest rates needed to reach 18% (six times current rates) to slow down the economic growth which resulted in a correction for the precious metals.  I believe we could easily see both Gold and Silver at double current prices before seeing any sizeable correction, due to higher interest rates.

SILVER
Silver is up another $0.48 today, closing at $39.65 on heavy volume. The Silver prices are fast closing in on $40 an ounce, a major resistance level. If Silver doesn’t bust through $40 quickly I would expect a possible correction to the $36 level.  Remember, while Gold continues to stay the course; with a ten year history of substantial yearly increases (average 21% per year) it has proven to be a very healthy and stable market. Silver, on the other hand, with its recent sharp price increase (up over 100% in the past year) is far more volatile and is subject to much larger price fluctuation. 

Today’s Important News

• Treasuries fell for a second day, pushing the yield on 10-year notes to 3.53%, as speculation that the Federal Reserve will maintain stimulus measures sent inflation expectations to almost three-year highs.
• The U.S. Labor Department reported today that more than three-quarters of the nation’s 372 largest metro areas reported lower unemployment rates in February than the previous month.
• Crude Oil prices are nearing a new two-and-a-half-year high. It was last at $108.34 per barrel, up around 10 cents and holding firm above $108.