Gold resistance at $1140 – strong move to follow

New York closed with the gold price at $1,139.60 up $8.30 on Friday. Gold held there in Asia but pulled back slightly in London to see the LBMA gold price set at $1,136.85 up $0.85. In the euro this was €1,007.86 up from €992.49 up €15.27.  This morning the dollar index started the day at 95.32 up a full 1.21 points higher from Friday’s 94.11, a complete recovery from Friday’s fall. Ahead of New York’s opening gold was trading at $1,134.00 and in the euro at €1,007.28.  

The silver price closed at $15.15 up 4 cents on Friday in New York. Ahead of New York’s opening silver was trading at $15.15.

Price Drivers

The gold price was held back by overhead resistance on Friday at $1,140 and looks set to continue to consolidate until this formation is completed. Then we will see the strong move, either way.

It will take some time for global markets to factor in what the Fed did do last week in terms of the U.S. dollar.  Our view received partial confirmation of this, in that there were no sales or purchases from or into the U.S. based gold ETFs.

As we said last week, “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.” 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 or the Gold Trust on Friday. This again leaves the holdings of the SPDR gold ETF at 678.183 tonnes and 159.30 tonnes in the Gold Trust.

We do see the Treasury continuing the policy of quietly managing the dollar exchange rate, particularly with the euro, so as to keep it stable around current levels in the $1.07 to $1.14 trading band. While the implied objective of the Fed, last week in not raising interest rates, was to ‘stabilize’ the dollar against other currencies, in essence, it is a competitive devaluation policy, ensuring the international trade competitiveness of the U.S is not undermined by other currency exchange rate depreciations.

Whether the G-20 says they will not OK a currency war, the world is in one already. This battle of the currencies will continue as we enter the multi-currency monetary system away from the dollar hegemony that has persisted since 1971.

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

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