GOLD, SILVER EXTEND GAINS

Gold and silver continue to extend their gains this morning as gold is up almost $4 and silver is up $.20. They are reacting to a weaker dollar, down 26 basis points at 80.27. Oil is also up, gaining $.50 at $80.18 a barrel. The situation in Europe seems to be improving with the announcement of severe austerity measures from the Greek government. This helped the euro to rebound and put pressure on the dollar. Gold is trading near all-time record highs in the euro and the pound. Even a little pressure on the dollar helps gold to make a nice move to the upside. Moreover, the dollar seems overbought and overdue for a correction downward. Remarkably the Greek government is now planning austerity measures that will cut their expenses by about 4.8 billion euros. These will come through spending cuts and tax increases including a rise in the value added tax, a cut in salary bonuses and a freeze in state pensions. Yet currency analysts said the euro is still at risk because there is no assurance that Greek measures will be implemented and because the austerity measures will contribute to drastically slower economic growth.

A research note from Standard Bank said that gold has been assisted by some dollar depreciation, but currency movements alone don't seem to be responsible for all of the gain. Moreover, they said, "The fact that gold is pushing higher in most currencies is a clear indication of good physical buying interest." I suspect it may also be due to competitive devaluations of the currencies. All currencies are falling against the best form of money, which is gold.

Sophisticated and knowledgeable investors such as George Soros, John Paulsen, David Einhorn and many others recognize the fact that gold is the best form of money. In addition, when there are competitive currency devaluations, they know that gold must rise. That's why they have each put billions of dollars into the gold market. If individual investors were to follow their lead, they are likely to be more successful as these sophisticated investors are generally correct when they make major market moves.

The ADP jobless report indicated the country lost another 20,000 jobs last week. The loss of jobs continues even though there are some signs that the economy may be improving. This report is likely to cause the Fed to remain on hold and the Federal government to continue its aggressive fiscal policies to try to improve the economy and create jobs.

Dow Jones Wire Service analyst Francis Bray said the breakout in silver yesterday opens up the $17.47 upside target. A wider projection highlights the $17.55 area with the potential for silver to rise above $17.62, perhaps as high as $19.42. This is excellent technical analysis and it certainly gives reason to consider silver and gold. Mitsubishi analyst Tom Kendal told the Dow Jones Wire Service, "Shorter-term players are reassured that the bottom in gold has been seen and are coming back into the market." In addition, Dow Jones Wire Service's analyst Francis Bray said that gold has also been given a further lift given the breakout yesterday. He said, "Upside projected targets congest at $1,175.50, but a retest of the $1,229 all time high is a distinct possibility."

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