Small U.S. demand and speculative trade continues to dominate gold price

Julian Phillips’ latest gold and silver market commentary and views on Asian demand.

New York closed at $1,182.80 down $21.20 on Thursday. Asia saw it hold there and London took down $3. The LBMA Gold price was set at $1,179.00 down $25.30. The euro equivalent stood at €1,047.07 down €29.06 while the dollar was weaker at $1.1260 down from $1.1192 against the euro. Ahead of New York’s opening, gold was trading higher in London at $1,180.40 and in the euro at €1,047.24.

The silver price closed at $16.12 down 41 cents on Thursday. Ahead of New York’s opening it was trading at $16.23.

The dollar index stabilized at 94.64 from 95.61 yesterday as did the dollar at $1.1265 from yesterday’s $1.1269. There were purchases of gold into the SPDR gold E.T.F. of 0.298 tonnes but none from or into the Gold Trust on Thursday. The holdings of the SPDR gold ETF are at 739.363 tonnes and at 165.58 tonnes in the Gold Trust.

A look at the gold price action implies more falls, but believe it or not there is still no clear pattern pointing the way for the gold price, yet. We could see it going either way at the moment according to the patterns of movement. The fall in gold in the euro has been nearly €50 in two days, but that reflects the fall of the dollar. So the theory that gold falls when the dollar rises isn’t standing proud right now.

Why is the gold price behaving like this? This, like most, is not a perfect market. It is clear that Asia won’t chase prices, but right now Asian demand is back in there and will be while the gold price is below $1,200, but as we saw earlier in the week, it fades away above that level. Why should they chase prices when they can get nearly all the world’s available newly mined gold at low prices?

What is not often mentioned is that not only does Chinese production not leave the country, but gold producing nations like Kazakhstan take their gold into their own vaults too. Much of Africa’s production is Chinese-owned and heads there.

With the small U.S. demand and speculative actions dominating the price and wanting it lower, the Chinese in particular are happy to enter the market when developed world selling gives cheap prices. It does seem that higher prices would reduce supplies to Asia so why push prices higher now? China in particular wants to maximize supply, we believe because it has a longer term objective in its sights. If it were able to dominate the world’s available supplies it could then want to see higher gold prices?

The myopic speculative view favors the downside, so keeps prices low. But China’s long term view may mature far this year!

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

Global Gold Price (1 ounce)
Today Yesterday
Franc Sf1,096.18 Sf1,150.41
US $1,180.40 $1,206.20
EU €1,047.24 €1,096.65
India Rs.74,878.67 Rs. 76,286.12
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