USA opposing AIIB and may oppose Yuan participation in SDR basket

These are seen as gold positive long term by julian Phillips in his latest analysis of the gold and silver markets and the geopolitical factors impacting them

New York closed yesterday at $1,193.70 up $3.10. Asia held it at $1,192 before London opened, where it held that level up until the “LBMA Gold price” setting. It was set at $1,192.55 down $0.65 which was the euro equivalent of €1,085.57, down €1.18. Ahead of New York’s opening, gold was trading in London at $1,194.40 and in the euro at €1,087.55.

The silver price closed at $17.00 down 6 cents. Ahead of New York’s opening it was trading again at $17.00.

We continue to expect consolidation below $1,200 but as the trading range narrows we await a strong move either way. Whether gold now breaks through this level or pulls back down is the question uppermost in gold & silver investor’s eyes.

The dollar is stabilizing with the dollar index dropping to 96.74. The euro is currently standing at $1.0989 as the Greek saga weighs on the currency.

One of the hardest realities that creditors face when looking at a bankrupt debtor is the fact that it was unwise to have lent funds to him in the first place. The pragmatic way forward is to accept these realities and find a formula where the debtor can lift his head and start producing again and the bad debt eliminated in a ‘dust yourself off and start all over again’ situation.

Unfortunately, when it comes to Sovereign debt no such formula exists, so the painful way forward must take place until realities are forced upon both creditor and debtor. The clock continues to tick for Greece until the end of April at the latest, but we expect pragmatism to bring that situation to a head before then.

If there is a “Grexit” we see the euro strengthening!

Further to our comment of yesterday, it seems that the U.S. is going to oppose the Asian Infrastructure Investment Bank (AIIB) helping us to see the IMF acceptance of the Chinese Yuan as one of the SDR currencies that make it up may prove divisive.

At the same time the dominance of the U.S. over the voting structure of the IMF where the U.S. has 16.83% of the votes and 85% of votes is needed before a resolution can be passed, will be under discussion. We doubt the U.S. will be happy to lose control of the IMF explaining why the Chinese are prepared to go it alone.  The world cannot afford to have a fragmentation of the monetary system, particularly while the global economy has a deflationary tendency. To gold investors such divisions are price-positive, long-term!  Julian D.W. Phillips for the Gold & Silver Forecasters – www.goldforecaster.com and www.silverforecaster.com

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