Julian Phillips’ latest analysis of what is happening in and driving the gold and silver markets.
Gold and Silver Today –
New York closed at $1,165.70 down $33.30 in a thin market but with heavy ETF sales, but still dominated by currency issues. Asia took the gold price up slightly to $1,174.00 before London opened. London then Fixed the gold price at $1,173.75 down $22.75 and in the euro, at €1,077.972 down €12.63, while the euro was at $1.0889 down nearly a cent. Ahead of New York’s opening, gold was trading in London at $1,174.60 and in the euro at €1,079.74.
The silver price closed at $15.87 down 35 cents. Ahead of New York’s opening it was trading at $15.95. We expect the silver price will continue to fall with gold but not at the same pace. Once Asian demand comes in we expect the silver price to recover quickly.
SPDR gold ETF Sales
There were sales of 4.478 tonnes of gold from the SPDR gold ETF but none from the Gold Trust on Friday. The holdings of the SPDR gold ETF are at 756.321 tonnes and at 165.46 tonnes in the Gold Trust. In a thin gold market U.S. investors sold a heavy but not huge amount of gold. But it did have an impact triggering stop loss selling and taking the gold price down to $1,165.70.
The news out of the U.S. was positive with new jobs created in the last month hitting 295,000 and unemployment down to 5.5%. This convinced investors that the U.S. economy has gained traction and will continue to grow at a strong rate. Some therefore believe that a rate hike will come far earlier than expected, possibly in June. If the growth continues at this rate, this is likely although the conservative view is that September remains the more likely date. In this case it is better to be too late than too early.
Consequently, 10-yr bond yields rose from 2.22% to 2.256% in the day, with more rises expected to come shortly. The dollar index rose to 97.61 up from record levels of 96.80 last week while the euro continued its tumble to $1.0858.
The Technical picture for gold degenerated, as support was seen to be broken. However, the Technical indications are for a very limited downside. If Asian demand comes in strongly in the next few days we could see the picture change again. Either way, we do foresee the gold and silver markets being extremely volatile for the next fortnight.
On Friday India was closed, but is back in business today. There has been a bounce to $1,173 in Asia as Asians see these prices as giving excellent value. They will likely restrain buying until they see the fall slow to a stop. We again note that Asian demand does not flow through immediately to the New York markets, as gold markets are not globally efficient. It takes a little time, but we should see the Asian response feed through in the week. As a reminder to gold investors to keep their perspective gold demand east of Greece accounts for over 75% of global gold demand.