Gold and Silver Prices Close Down: Friday 7/10/2011

We have reached the weekend after some ups and downs this week with gold and silver spot markets closing down on Friday 7 October 2011, at spot $1638 and $31.16 respectively. 

Gold is down from its circa $1920 highs in August and September and ready for another run come year end or even through to Summer 2012. If not, seeing the $2000s by the end of 2012 is certainly achievable provided no one floods the market with bullion or any new minefields are reported. 

Gold price manipulation cannot continue after a correction that allows investors to grow a larger base. This will provide buyers at this stage to at least take a punt with a few gold coins instead of wiring an extra £1000 into your ISA account.

Gold 2+ Month Chart

Silver 2+ Month Chart

Murky waters persist after a large sell off in silver, down from its recent high of $44.25 on the 22 August 2011 or even $49.83 on 25 April 2011. While the current price in the early $30s for an ounce sounds risk free, I am uncertain of silver's vulnerability in the current economic climate. My concern is whether industrial and manufacturing demand will remain stable in the short term. 

Silver 5 Year Chart

Investment demand appears to be steady in the UK retail bullion market, with popular items of stock with delivery delays of 2 weeks or more. By watching certain Youtube commentators I am able to make an assessment of whether stock is in demand in other countries. There does not appear to be a shortage of bullion for sale, however there are certainly indications that demand is growing in the US, UK, China, Russia, India, Brazil and so on. I refer to the demand from the population and retail buyers as well as demand from governments across the spectrum. 

There was clearly considerable support at the lower levels for these precious metals, with buyers jumping back in during the week ending 30 September 2011. Recent margin hikes have only contributed to the recent sell off, putting downward pressure on prices. In addition, the flight to liquidity has resulted in further profit taking across the board as investors and big funds review their positions. The Forex markets have seen much volatility as a result of the flow of capital and the changes in investment strategies across the globe.

Gold 5 Year Chart

Over the weekend many gold and silver investors worldwide will be contemplating spending more of their disposable income on both metals. The big attraction is the disparity between the physical value of gold and silver and the paper/ futures contracts. The recent fall in the gold price is refueling the engine, allowing physical holdings on a global scale to grow steadily.  While short term corrections in price will occur, the overall trend is up.

I am less worried about my recent losses than I am about an appropriate storage system for my own holdings.