Gold rose overnight through the $1200 psychological barrier as Saudi jets bombed Yemeni rebels. Julian Phillips’ latest appraisal of what is driving the global gold and silver markets.
Overnight, the Saudi Arabian [Sunni] nation attacked the Houthi rebels [Shia]in the Yemen close to the critical oil route through the Suez Canal, giving rise to a jump in the oil price [$58.61 Brent $51.13 WTI] with gold investors in Asia pushing gold through resistance convincingly to $1,213 in the face of a degeneration of global security. We see the Yemen as part of a widening Middle East Shia / Sunni conflict and not restricted to particular countries. This is religion not geographical. It has the potential to further ignite the Middle East. But for gold investors it is the ‘ripple’ effect of the turmoil not the impact of the oil price on the global financial scene. The oil price rise, should it continue and hold will raise inflation globally, but not lead to an increase in consumer spending. Consumers have been inclined to save any benefit of low oil prices and not spend to increase growth. They have a deflationary attitude, one that will continue and likely undermine growth. However, we expect a settling down of the oil price should the corridors for oil transport not be affected. Once the oil price settles back we may well see further oil falls, likely to new low levels. We do not see gold moving with the oil price, but with the insecurities spawned by the conflict’s spreading.
What is of importance to the gold price is the breakthrough overhead resistance at $1,200. The strong move we expected yesterday came through quickly. If the gold price holds above $1,200 it is support, once again. The next two days will see if it holds.
Markets and SPDR Gold ETF
New York closed yesterday at $1,195.60 up $1.90. Asia took it much higher to $1,213 before London opened, where it slipped slightly to $1,210.6. The “LBMA Gold price” was set at $1,209.40 up $16.85 which was the euro equivalent of €1,099.65 up €14.08. Ahead of New York’s opening, gold was trading in London at $1,208 and in the euro at €1,097.98.
The silver price closed at $16.97 down 3 cents. Ahead of New York’s opening it was trading at $17.15. It now has direction from gold and should be robust, today
There were sales of 1.194 tonnes of gold from the SPDR gold ETF but nothing from or to the Gold Trust on Wednesday. The holdings of the SPDR gold ETF are at 743.207 tonnes and at 164.71 tonnes in the Gold Trust.
The dollar is slipping and stands at 96.43 while the euro is climbing and currently stands at $1.1013 and the Yen at 118.67.