On Tuesday New York closed at $1,139.50 down $13.60. The dollar was stronger at $1.1496 this morning up from 1.1539, against the euro, with the dollar Index stronger at 94.10 up from 93.39 yesterday. This morning the LBMA gold price was set at $1,134.40 down $19.85. The euro equivalent was €990.05 down €12.16. Ahead of New York’s opening, gold was trading at $1,124.70 and in the euro at €984.42.
The silver price closed at $14.64 down 14 cents over Tuesday’s close in New York. Ahead of New York’s opening today it was trading at $14.15.
The Shanghai equity market is trying to stabilize, after the People’s Bank of China cut interest rates. There was a lot of short covering there as the market got over its shock of being ‘let loose’ by the government and the Yuan acclimatized to a floating exchange rate.
The Fed has been right to take note of the global economy when deciding to raise rates as we can now see just how the global economy and financial markets are able to affect each other. As global liquidity is tightening [despite QE] volatility is instantly contagious. Even a small Fed rate hike could have the same impact on markets and particularly foreign exchanges. More to the point, these are out of the control of central banks. Volatility can be an expression of that lack of control as we have seen last week and this. As we head towards a different monetary system inclusive of the Yuan [which will not be directed by the U.S.] we expect such volatility to rise, damaging confidence in the monetary system even more.
Let’s be clear on this, the great fall of China sent waves even through U.S. markets, due to structural faults and were not a brief shakeup to be followed by calm for the foreseeable future. We see it as a sign of things to come.
But, the Fed will act in the interests of the U.S. as mandated, so a rate rise could still ignore the potential impact on the rest of the world’s financial markets?
During the last week the gold price has remained steady to slightly lower, despite large amounts of buying into the SPDR gold ETF. We feel the last week’s events will turn out positively for gold once markets have settled. There were no purchases or sales into or from the SPDR gold ETF or the Gold Trust yesterday. This leaves the holdings of the SPDR gold ETF at 681.105 tonnes and 162.07 tonnes in the Gold Trust.