Julian Phillips’ analysis of what’s going on in the gold and silver markets and key market drivers.
New York closed at $1,193.40 up $3.70 on Monday as the trading range remains tight but pushing up persistently. Today sees the dollar weaker at $1.1126 down from $1.0898 against the euro with the dollar index at 96.05. The LBMA Gold Price was set at $1,186.60 down $2.15 and the equivalent euro price was €1,061.83 down €20.92. Once again this was a currency play against a weaker dollar and stronger euro. Ahead of New York’s opening, gold was trading in London at $1,188.60 and in the euro at €1,068.93 with the euro recovering still further.
The silver price rose slightly to $16.80 up 7 cents in New York. Ahead of New York’s opening it was trading at $16.66.
With the dollar weakening traders and speculators need to decide is gold going up against a stronger euro or up with a stronger dollar. Any movements we see in the gold and silver prices are still being moved by currencies. The moves are so small now that we hesitate to attribute too much to them. The price of gold and silver remains in the tight trading range it has for the last couple of weeks and in the fairly narrow trading range it has been in for 18 months. We are close to several global events that will directly impact the gold price and by extension the silver price. After implying the dollar bull run could be over, we now see the dollar falling back quickly as visions of a strong recovery begin to fade after guiding investors for the last 7 years.
With the euro recovering [or is it the dollar weakening] the first of these is expected to be Greece, where a major meeting of the main E.U. leaders took place on Monday. The signs are that this was a conclusive meeting where Greece is going to be given a take it or leave it proposal. Greece in turn has formulated its own plan to give to these leaders. While the Greeks say they can pay the first portion of the IMF debt this week, it is clear that this will drain remaining cash resources. With the Greek financial situation not only bankrupt, we are now at the point where they will have to leave the E.U. and euro if they fail to pay all due tranches of their debt. As the euro will go much stronger if Greece leaves the E.U. it seems the market is discounting a ‘Grexit’. One could say they could have taken action to leave the E.U. and euro years ago and kept the funds in the country that have now gone. But politics has demanded the tragedy and the Drachma. The Drachma has now become palatable to the Greeks.
Yesterday saw sales from the SPDR Gold ETF of 4.176 tonnes and purchases into the Gold Trust of 0.11 of a tonne. The holdings of the SPDR gold ETF are at 709.891 tonnes and at 166.71 tonnes in the Gold Trust. While these were large sales they had no impact on the gold price. As we move into ‘no widows and orphans’ territory we believe these sales were from an investor unhappy with the risks, despite the limited downside ones.
Silver still continues to mark time waiting for gold to lead the way.