Daily Market Update 5/2711

GOLD
Gold, up, up and away, closed at $1,534.10, up $11.20 an ounce on light U.S. trading. In the face of the European debt crisis none of the global floor traders or commodity houses wanted to be short Gold over a long holiday weekend.

A Gold Question that needs the right answer...
A popular negative gold question that I am often asked is “Will higher U.S. interest rates drive down the price of gold?” I always refer back to 1979, when interest rates needed to be 18% before breaking the major rally of gold, and I doubt we will see 18% interest in the next 5-10 years, unless we see hyperinflation. Considering today’s $14.3 Trillion nation debt, I doubt we could see U.S. interest rates higher than 8-9%, because the interest needed to pay the national debt would make it impossible to service. However, I have just read a great article on the effects of a series of interest rate hikes in China over the past six months on Gold.

You can read the article at www.mintstategold.com/investor-education/interest_rate_effect_on_gold_price/

SILVER
Silver closed up $0.38 today at $37.71 per ounce on light trading. The week’s trading activity in Silver should make Silver Bulls happy. Finally, up $2.63, or 7.5% increase for the week, while showing excellent physical demand and high Jewelry consumption numbers coming out of Asia.

Sovereign debt Information...

For many of my clients who have an interest in following the possibility of sovereign debt default and the value of the Dollar/Euro exchange rate, let me provide the following information.

Risk of a U.S. default can be seen in the credit default swap (CDS) market. 1 year U.S. CDS has risen from 23 to 37 (or by 60%) in the last six trading days; 5 year U.S. CDS is 46.40.

According to this measure, the U.S. is now more likely to default than Slovenia and Indonesia in the next year. This compares to 360 CDS trades in the week on Spain’s sovereign debt, 191 on Greece, 142 on Portugal and 136 on Italy.

CNBC Credit Default Swap Webpage http://www.cnbc.com/id/38451750/

Today’s Other Important News:

Pending home sales fell 11.6% in April, the National Association of Realtors said Friday. The pending home sales index reading of 81.9 in April came after a downwardly revised 92.6 in March, from an initial reading of 94.1. The big drop came after two monthly gains, and the NAR cited unusual weather and economic softness.

My 24 page research study on Hyperinflation is completed and now available. After three months of research I am proud to share the information with clients and friends. The title of the booklet is “U.S. Hyperinflation is Coming Soon, will Gold Confiscation or a Gold Standard be Far Behind?”

For a free copy of the booklet just email [email protected]

For many of my clients and friends who are Gold & Silver addicts, I am now also posting additional market news and developments on Twitter.