Gold: stabilising factor in monetary realignment. Silver: no market for widows and orphans!

New York closed with the gold price at $$1,145.60 down from $1,146.80 yesterday. Ahead of London’s opening the price moved down to $1,142 as recorded in London. China is open today. The gold price was set at $1,143.30 down from $1,147.90 at the LBMA gold setting. The dollar Index was down at 95.15 from 95.47 and the dollar was trading against the euro at $1.1305 down from $1.1254. In the euro the fixing was €1,011.32 down from €1,019.87.  Ahead of New York’s opening gold was trading at $1,144.75 and in the euro at €1,012.61.  

The silver price closed at $16.02 up from $15.80 up 22 cents over yesterday’s close. Ahead of New York’s opening, silver was trading at $15.67.

Price Drivers

The Shanghai Gold Exchange reopened today after the week long holiday, but its activity has not yet fed through to the gold price as developed world markets continue to dominate gold prices. In London and New York the current consolidation pattern is almost complete and a strong move either way is close. These days, with High Frequency Trading, this means high volatility. With the liquidity of the physical gold market falling uncomfortably we do expect dealers to turn their attention to physical prices from COMEX prices, as conditions tighten in the physical market.  The result may well be a move of greater proportions than we have seen for some time!

There were sales of 1.787 tonnes from the SPDR gold ETF but no activity in the Gold Trust. This leaves the holdings of the SPDR gold ETF at 687.196 tonnes and 160.62 tonnes in the Gold Trust.

Further to our comment on the Yuan steadily moving into a strong position in international trade, yesterday, China has announced it has opened a payments clearing system for the Yuan. Why is this important? Because we are seeing an acceleration of the pace of the internationalization of the Yuan. This will, eventually change the monetary system into a multi-currency system. With this comes a disruption in currency markets, which we then see as needing gold as a calming asset. Such a change in Gold’s role will lead to growing demand for it, at a time when its availability is lessening considerably. Most thought this path would be a decade long one, but as we now see, the next couple of years will see that happen, if this pace keeps up.

Silver pulled back strongly this morning by 30 cents. This well describes just how volatile the silver price can be. If demand comes in on COMEX for silver again it will sprint higher very quickly. This is no market for widows and orphans.

In Switzerland silver is treated as a commodity attracting 8% Value Added Tax, making physical dealings come with a much higher risk than gold, there.

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

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