Julian Phillips’ latest update on the gold and silver markets and their key geopolitical drivers.
Gold closed at $1,178.60 down $6.10 on Friday in NY. Asia lifted it to $1182 over the weekend before the LBMA Gold price was set at $1,182.75 down $9.60 today. The euro equivalent stood at €1,091.62 down €8.25 while the dollar was virtually unchanged. Ahead of New York’s opening, gold was trading higher in London at $1,185.60 and in the euro at €1,094.48.
The silver price closed at $15.72 down 17 cents on Friday. Ahead of New York’s opening it was trading at $15.85.
Even now there is no clarity on the direction of gold and silver on the charts. However, in New York on Friday speculators pushed it lower but not enough to bring in the triggering of stop losses en masse. We feel they might try again today as equity markets defy gravity and reach new records.
The dollar index fell to 97.06 on Friday against today’s 97.20l with a slipping dollar leaving the euro at $1.0832. It seems the line in the sand is 100 on the dollar index at which point it is pushed back. It is clear that U.S. exports are being hurt even at these levels. With an index over 100 the damage would be widespread.
There were no purchases or sales of gold into the SPDR gold E.T.F. or the Gold Trust on Friday. The holdings of the SPDR gold ETF are at 742.347 tonnes and at 165.58 tonnes in the Gold Trust.
The Greek tragedy worsened on Friday with the meetings ending with acrimony. The German Finance Minister is at the forefront of this and said on Saturday that Germany is preparing for a Greek default. The question we all have to ask, particularly in the gold and silver world is, “Is this what both sides want?” We suspect it is. But the negotiations are now confrontational despite them being close now. But still we have to wait and see if this is now political pantomime or horse trading at its meanest. As we said last week, “The exchange rate of the S: € will not be affected by Greece until a conclusion is reached one way or the other.”
In India demand is tapering off after the second biggest festival in their calendar. Traditionally the farmers turn their attention to the planting season, but we suspect the India’s seasonality is reducing as the economy grows alongside urbanization and modern IT capabilities. During this quiet time we strongly suspect that many investors will buy forward if they see the gold price hold at bargain basement levels. We note too that last year if we include a guesstimate of smuggled gold that Indian demand was above record levels seen when duties were low. 1200 tonnes of demand would not be an outrageous level we believe. Add to this ongoing Chinese demand and there is little stock available for western investors. Once they are seen in the market place again we expect them to pay up for the gold they want. Hence the strange consolidation pattern, at present.
Julian D.W. Phillips for the Gold & Silver Forecasters – http://www.goldforecaster.com and http://www.silverforecaster.com