As markets and dollar fall, gold is back on a rising path

On Friday New York closed at $1,159.40 up $26.70. The dollar was weaker at $1.1444 down from $1.1062 on Thursday with the dollar Index weaker at 94.94 down from 96.50 on Friday. It opened on Monday at 94.54. Asia took the price down on Monday to $1,154 as global equity markets slid. This morning the LBMA gold price was set at $1,153.50 up $5.55. The euro equivalent was €1,006.11 down €13.42 as the euro surged. Ahead of New York’s opening, gold was trading at $1,159.50 and in the euro at €1,007.65.  

The silver price closed at $15.28 up 2 cents over Friday’s close in New York. Ahead of New York’s opening today it was trading at $15.00.

Last week and this morning, saw different factors across the world knock equity markets down heavily. In China, the conciliatory statement to the IMF that the government would move more to allowing markets to move according to market forces saw those who were still allowed to sell, do so, knocking the Shanghai market down another 10% on the day.

In the U.S. where markets have risen because better yields can be found in equity markets than in the bond markets, the Dow continued to fall through support as a rate rise will come from the Fed in September or before the end of the year. Cash is the safest place to be unless the international cash aspects of gold are used. To validate that we see the dollar has sunk against the euro, the Yen and sterling while the Yuan has fallen against the dollar. This week will see heavy volatility in global financial markets.

Gold was rising against the dollar ahead of New York’s opening today.  To that end there were purchases of the large amount of 5.96 tonnes into the SPDR gold ETF and o.6 of a tonne bought into the Gold Trust on Friday. This leaves the holdings of the SPDR gold ETF at 677.827 tonnes and 161.62 tonnes in the Gold Trust.  

While the fundamentals of markets may not drive prices all the time they do so eventually. The greatest driver of equity markets is sentiment, which eventually will respond to fundamentals. It is in the nature of investors and the media to put a positive ‘spin’ on factors, but when smart investors are joined by the crowd the response to fundamentals becomes strong and emotional as we are seeing now. That ‘thundering herd’ can become unstoppable. But what’s different today is that global equity markets are joining the herd. –

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

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