Daily Market Update 5/12/11

GOLD

Gold closed at $1,502.30, down $2.90 for the day. Gold sold off with Silver overnight in Asia, reaching $1,483 at one point. Gold continues to show strength at $1,500 and rallied back. The World Gold Council (WGC) released the World Official Government Gold Holdings as of May 1, 2011. Ten different Central Banks have replaced U.S. Dollars in their reserves with Gold. No Central Banks sold Gold, even with Gold setting all-time highs. China is holding over 1,000 metric tonnes of Gold, which represents 1.6% of the reserves. Compare that to the United States and Germany, the countries with the largest Gold holdings, with over 70% of reserves in Gold. No wonder reports from Asia continue to talk about China & India building up Gold reserves as a replacement to holding U.S. Dollars.

Demand from India and China pushing the price of Gold causes Steve Brice, Chief Investment Strategist at Standard Charter Bank, to feel the price of gold will soar above $2,100 an ounce by 2014.

SILVER
Silver closed at $34.57, closing down $0.85 on the day. Silver traded down to $32.60 over night on follow-through selling coming out of New York weakness. Then the market turned up, on respectable volume, and just started moving higher, going as high as $35.71. The net day-to-day change was down only 85 cents, but the technical trading activity will be very bullish if Silver can rally back over $35, otherwise we will test the lows again.

The Shanghai Gold Exchange raised silver margins yet again, and this is not to be discounted. The Chinese have been significant buyers all the way up on the rally, and were also the buyers which caused the recent dead-cat-bounce. We tested down as low as $32.30 but are now trading up from there.

Today’s Other Important News

The Bank of England raised their inflation forecast for the UK economy to 5% during the second half of 2011. The UK trade deficit for March 2011 was 7.66 billion Pounds, a larger deficit than projected.
U.S. wholesale prices rose a seasonally adjusted 0.8% in April, driven once again by surging fuel costs, the government reported Thursday. A sharp increase in oil over the past seven months has fueled a spike in wholesale prices. Wholesale costs have jumped an unadjusted 6.8% in the past year, the largest 12-month increase since September 2008.
Sales at U.S. retailers increased 0.5% in April to a seasonally adjusted $389.4 billion, the Commerce Department estimated Thursday. This is the 10th straight month of sales gains

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