Gold acting as a currency in global parity wars

The New York gold price closed at $1,072.70 down from $1,074.60 on yesterday’s close.  In Asia prices drifted slightly higher to $1,073.25 as the dollar weakened to 97.67 down from 98.40 on the dollar Index. The euro is at $1.0975 up from $1.0935 yesterday against the dollar. The London a.m. LBMA gold price was set at $1,072.00 down from $1,078.40, on Wednesday.  In the euro the fixing was €979.00 down from yesterday’s $986.55. Ahead of New York’s opening, the gold price was trading at $1,075.30 and in the euro at €981.74.  

The silver price in New York closed at $14.15 down 1 cent. Ahead of New York’s opening the silver price stood at $14.22.

PRICE Drivers

While the gold and silver prices are following the euro, today should see a small rise in the gold price as the euro reaches $1.10 but no fireworks should be expected as markets wait for Monday’s Fed announcement.  Fridays are usually the busiest time of the week for gold and silver prices, but with all waiting for the Fed, we may find that this Friday is very quiet. Many assumptions will be made about the Fed’s next moves and some speculators may well take positions ahead of their move. This promises to give all financial markets across the world a volatile week.

Once again, we saw no sales from the SPDR gold ETF and nothing from the Gold Trust, on Wednesday. The holdings of the two gold ETFs, the SPDR gold ETF and the Gold Trust remain at 634.63 tonnes in the SPDR gold ETF and at 157.07 in the Gold Trust.

Again we look forward to 2016 and look at the path of global currencies and gold. As this week has clearly shown gold is moving as a currency against different ones. So, where in 2016+? What we will say is that the interplay of exchange rates now has a direct impact on each country’s trade position in the global picture. While the G-20 may have agreed that they would not manipulate their exchange rates to gain a competitive advantage this has been happening on a broad front since then. But where were the start line and the finish lines for this agreement?

We see some central banks blatantly managing rates and using measures designed for their economies internally directly affecting their exchange rates. What a nearly 50-year journey from fixed exchange rates, to re- and de-valuations of different ones, to ‘floating’ rates to manipulated rates. What next? We note that countries don’t have friends, they have interests. If the journey continues, it is inevitable the gold will take a measure of value role in a multi-currency monetary system.

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

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