Julian Phillips’ latest analysis of what is happening in the gold and silver markets with pertinent comment on a big sale from the SPDR gold ETFs and on the proposed Indian gold deposit scheme.
There was a large sale from the SPDR gold ETF yesterday of 7.763 tonnes which pulled the gold price back in New York, but did not penetrate support. It was accompanied by a sale of 0.46 of a tonne from the Gold Trust on Monday. The holdings of the SPDR gold ETF are at 763.487 tonnes and at 165.97 tonnes in the Gold Trust. The fact that support remained so resilient demonstrates the strong underlying tone, above $1,200. Asian demand remains robust and this price area attractive to Asian investors. The longer the gold price remains above $1,200 the more chances there are that prices will hold.
We have seen “gold Deposits schemes” being touted in the Indian budget as though this will free up gold, tightly held, in India. In the past such schemes have failed, just as Indian gold ETFs have failed. Will the present schemes succeed?
There is an underlying problem in India that has proved insurmountable for many decades. The Indian public has seen so much corruption in government and in government bureaucracy which has hurt gold investors so much they hidden the fact that they own gold. There is an entire ‘black’ financial world out of sight of government, based on property and gold. Until government sorts out corruption, such schemes will continue to fail. The corruption is so deep rooted that we do not expect any future anti-corruption measures in India to succeed. We expect Indian investors keep their financial affairs as far away as they can from public eyes because of this. To subscribe to any public, gold deposit scheme would mean the veil would have to be lifted something we do not believe will happen.
The euro tried to recover in Europe yesterday but is struggling to stay above $1.12 today with the dollar index rising to 95.47 from 95.17. Equity markets are blooming, reaching new highs, but most believe this is on the back of quantitative easing and record low interest rates. For sure the markets can go higher still for as long as markets believe that interest rates will not rise. It is clear that the Eurozone equity markets will be encouraged by low interest rates for far longer than will be the case in the U.S.A.
New York closed yesterday at $1,205.50 down $5.60. Asia took the gold price up to $1,210 before London pulled it down to $1,208. London then Fixed the gold price at $1,207.75 down $9.00 and in the euro, at €1,081.196 up €3.735, while the euro was almost unchanged at $1.1170 down nearly half a cent. Ahead of New York’s opening, gold was trading in London at $1,208.40 and in the euro at €1,082.07.
Thus the silver price is still cautiously moving with the gold price, despite the struggle gold is having in moving higher at the moment. It appears that silver investors are ready to take the silver price higher. Only a break in gold’s support will bring on ‘brutal’ falls we feel.