Potential for disruptive monetary and financial accidents ahead

Julian Phillips’ latest gold and silver market commentary and thoughts on the price drivers that lie in wait.

New York closed at $1,199.00 down $3.50 on Thursday in NY. Asia took it up to $1,203 with London holding it there ahead of the LBMA Gold Price. The LBMA Gold price was set at $1,204.55 almost the same as yesterday. The euro equivalent stood at €1,111.72 down €17.50 against a weaker $: € rate of $1.08355 against yesterday’s $1.0673. Ahead of New York’s opening, gold was trading higher in London at $1,205.20 and in the euro at €1,115.05.

The silver price closed at $16.29 down 3 cents on Thursday. Ahead of New York’s opening it was trading at $16.50.

The trading range of gold and silver has tightened considerably, with demand and supply in the London and New York markets almost in balance. So we expect a strong move either way shortly. The dollar continues to weaken, but gold has not risen with the euro at the same pace. The dollar index is 97.11 down from 99.27 at the end of last week and the euro up at $1.0833 up from $1.0581 earlier this week. We see this as a correction on foreign exchanges that may have some way to go as speculators take some profit from the short positions on the euro. However the factors that drove the dollar higher remain in position and the trend remains for a stronger dollar.

Both the U.S. and the I.M.F. are stating clearly that the monetary stimuli being seen in the world needs backing up with governmental policy support. The I.M.F. has warned of rising risks to the global economy. Since October 2014 financial risks have risen and rotated to parts of the financial system that are harder to assess. It warned that risks had increased amid a “moderate and uneven” global economic recovery, with rates of inflation “too low” in many countries. The IMF cited divergent growth and monetary policies as having increased tensions in global financial markets, resulting in “rapid and volatile moves” in exchange rates and interest rates over the past six months.

It suggested that risks are rotating away from banks and into shadow banks, from solvency to market liquidity risks and from advanced economies to emerging markets.  These warnings may not garner must reaction so we may see some disruptive monetary and financial accidents in the not so near future. Needless to say any such accidents will be gold positive.

There were no purchases or sales into or from the SPDR gold E.T.F. or the Gold Trust yesterday. The holdings of the SPDR gold ETF are at 736.081 tonnes and at 165.28 tonnes in the Gold Trust.

Julian D.W. Phillips for the Gold & Silver Forecasters – www.goldforecaster.com and www.silverforecaster.com

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