Gold & Silver and the G20 Central Bank Plan

By FX Empire Analyst - Barry Norman
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G20 officials stated that central banks from the major economies stand ready to take steps to stabilize financial markets by providing liquidity and preventing a credit squeeze if the Greek election result roils markets.

Sterling rose slightly against the dollar on Thursday after the British government and the Bank of England said it will act together with new monetary tools to address tightening credit conditions in the country.

The Fed will also be ready to act if required. This will be one of the first time that G20 central banks have working in unison around the globe. Markets are also expected the Fed to relax monetary policy or introduce some new stimulus plan, to help the ailing US economy jumpstart.

Gold futures prices have revived a tad in the early trading after a nice pull back in late yesterday. The lower US inflation would have increased the deflation concern which led the metal to a sharp drop from its intraday high but the same has raised expectation for Fed to embrace fresh easing and helped the metal to revive.

Asian equities are also having a tepid lukewarm day ahead of the most eyed Greece election on June 17. The Euro at present is showing slight weakness against the dollar after the Spanish bond yield rose to the record high of 7.01%, an unsustainable level.

Markets are expected to be busy  enough as diversified comments are coming from the leading financial chiefs ahead of the highly anticipated Greece re-election and Fed meet. While the G-20 leaders are ready to infuse liquidity to contain the credit squeeze, severe strain might emerge after an unexpected outcome of three elections this week end. France and Egypt are the two other countries having ballot creating nuisance in  market.

However, a coordinated attitude from central banks to provide liquidity may lead temporary support to the market. Gold is probably therefore taking the advantage out of it , however; the comments from the diplomats are still not convinced especially after the Fed let down the market expectation few days back. Hence, the splendid gain may be short-lived. Reports today may show the awful  state of US industrial production and a feeble confidence which may lend support to gold in evening. On the other hand, US treasuries inflows might rise and that is supportive for dollar. Said above, it is apparent that a disordered trading session is ahead today. While global concerns are fatal for gold, proactive statements from officials would be the accommodating cause for prices to stay strong. Hence, probable range for gold would be $1607-1642.

Silver futures prices have also revived a bit which may be due to the gain in global equities and comments from the officials for stimulus. However the  market may be very volatile today ahead of the Greece election and reports today may show the awful state of US industrial production and lackluster confidence which may lead silver to a down side in evening. On the other hand, US treasuries inflows might rise and that is supportive for dollar. 

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