The gold price rise was still not the strong move we are waiting for as it is within the trading range we expected to see. Overhead resistance is at $1,140.
While the rate hike discussion gave relief to the emerging world and confirmed that the U.S. consumer still needs to get to a financially robust position, it gave gold investors a great deal of insight into the direction of gold and silver. We expect the U.S. equity market and the bond market to rally, but to fall back subsequently.
Janet Yellen made clear U.S. concerns over the global economy and, as we said earlier in the week, its impact on the U.S. economy. But gold is not subject to local phenomenon, it is international in its value. If it is to rise in the dollar then it will rise in all currencies as most currencies will continue to try to fall against the dollar. When we saw the G-20 agreement not to indulge in competitive devaluations we knew that, as followed the last agreement not to do so, it was a signal for such devaluations to accelerate. What we expect to see now is not simply competitive devaluations but to see justification for such as a means of ‘defense’.
The impact will be seen from the emerging world, on the dollar exchange rate. While the dollar is still only in the mid-way of a bull market, its potential rise is not wanted by the Fed or the Treasury. To us this is sufficient to know that they will arrest this bull market in the dollar. As we saw yesterday the dollar is now falling and the ‘carry trade’ comfortable with holding their positions as they are now. With U.S. investors seeing gold as moving the opposite way of the dollar, this is gold positive. With the gold ETFs in the U.S. still to react fully to the Fed statement we saw no dealings in the SPDR gold ETF but did see a 0.60 of a tonnes sale in the Gold Trust yesterday. This again leaves the holdings of the SPDR gold ETF at 678.183 tonnes and 159.30 tonnes in the Gold Trust.