Daily Market Update 11/23/11

GOLD

After testing the $1,675 resistance price level this morning, Gold rallied. At 11am PDT, gold is trading at $1,690.40, down $12.20 per ounce today an excellent volume ahead of a holiday weekend.

As the World’s equity, commodity and currency markets continue to drop, safe haven investments and liquidity to meet margin calls are where investors are going. Liquidity needs is making gold/silver prices look like a pogo-stick. However, with an extraordinarily strong U.S. Dollar, gold and silver continues to show heavy demand and price support is very bullish. Why is the Dollar so strong? Look at the crisis in Europe and the possibility of sovereign debt default. Even European banks are increasing selling Euros and buying dollars. Foreign bank deposits at the Federal Reserve have more than doubled to $715 billion from $350 billion since the end of 2010.

Analysts at Barclay’s Bank remain bullish on the price of gold. The firm issued a report last week saying that with gold near $1725 per ounce, we could see renewed buying to push the price of the precious metal well over $1840 per ounce in the medium term.

There are strong signs that the U.S. economy is contracting as the Bureau of Economic Analysis just revised its estimate of third-quarter growth down from 2.5% to 2 %. President Obama wants an ¬economic stimulus package, demanding that a bitterly divided Congress pass an extension of payroll tax cuts before the end of the year.

SILVER

Silver is closing near the highs of the day. At 11am PDT, silver is trading at $31.90, down $0.75 per ounce for the day, after reaching $31.30 earlier today. Demand continues to be strong.

Canadian billionaire Eric Sprott has filed for the purchase of $1.5 billion in Silver bullion for covering an expected demand in his Sprott Asset Management’s silver ETF. A $1.5 billion in purchase will require about 45 million oz of silver. Such a large purchase has normally lead to higher prices. Sprott’s $580 million silver purchase in 2010 was accompanied by an almost 175% gain in COMEX Silver when prices surged from $18 to $49 per ounce. The current purchase of $1.5 billion is almost 3 times the 2010 purchase and as such prices could easily double or even triple.

Tomorrow starts the Thanksgiving holiday weekend, so the next Daily Blog will be on Monday Nov. 28th