China middle class growth to add to record gold buying levels there

New York closed yesterday at $1,155.20 down $2.70 with Asia and London holding it there. The dollar was weaker at $1.1011 down from $1.0992 against the euro with the dollar Index at 96.66 down from 96.94 before London opened.  The LBMA gold price was set this morning at $1,154.75 up $1.55. The euro equivalent was €1,047.53 up €2.02. Ahead of New York’s opening, gold was trading in London at $1,155.00 and in the euro at €1,047.90.

The silver price fell to $15.38 down 12 cents in New York. Ahead of New York’s opening it was trading at $15.33.

The gold market is seeing thin trade with few buyers or sellers, allowing the gold price to be nudged around by currency moves. Since the 8th July the holdings of the SPDR gold ETF have moved from 709.65 tonnes and at 167.40 tonnes in the Gold Trust to 709.071 and to 167.76 tonnes in the Gold Trust. This continues to show that the U.S. investor is not interested in gold at present. All the action in gold is occurring below the surface of the price and in Asia, primarily China.

The news that China is doing better than expected, achieving over 10% growth on their retail side and 8.4% on the services side, points to a fast growth rate in their middle classes. It is this group that will add to the current record levels of buying of gold into China. These numbers directly impact gold demand.

While the Greece tragedy, we feel, is no longer impacting the euro exchange rate, the report from the IMF that Greek debt is unsustainable with it reaching 200% of GDP within 2 years really does make a real tragedy of the current deal, which sad to say the Greek Parliament looks like accepting. While it may be politically acceptable to give a “grace period” [postponing repayments and interest?] for 30 to 40 years, according to the IMF, all this does is to emasculate Greek sovereignty and allow the creditors that time to write-off the debt. The country is bankrupt and this deal makes sure it stays that way for more than the next generation. Keeping such a weak link in the E.U. does achieve the objective that it will keep the euro weak for the foreseeable future and maybe longer. Overall this will be positive for the gold price in euros. The entire exercise has weakened the credibility of the Eurozone. For weak nations to use the euro, which reflects far greater strength than their economies deserve, is a fundamental mistake for them.

Silver will likely recover faster than gold now.

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

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