Gold could suffer ‘collateral damage’ as global equities fragile

The New York gold price closed Monday at $1,076.90 down from $1,094.60. In Asia it was moved up to $1,083.00 and London held it just below that with the LBMA price set at $1081.1 down from $1,090.75 with the dollar index almost the same at 98.97  from 98.94 on Thursday. The euro was at $1.0897 up from $1.0883 against the dollar. The gold price in the euro was set at €992.29 down from €1,002.25. Ahead of New York’s opening, the gold price was trading at $1,081.15 and in the euro at €992.29.  

The silver price in New York closed at $13.85 down 30 cents.  Ahead of New York’s opening the silver price stood at $13.77.

Price Drivers

Wednesday saw no purchases into the SPDR gold ETF but a purchase of 0.99 of a tonne into the Gold Trust. The holdings of the SPDR gold ETF are now at 654.057 tonnes and at 161.16 tonnes in the Gold Trust.  And yet the gold price tumbled. With COMEX futures and Options dominating prices despite no physical transactions, the fall in the gold price stretches credibility too far. We could well see some heavy volatility either way today.

With the dollar still restrained below 100 on the dollar index and the euro stronger against the dollar the gold price moves were against all currencies and the supposed link to the euro irrelevant at the moment.

The overriding mood in global financial markets remains pointing to the downside. Chinese equity markets ‘officially’ entered a bear market today [down over 20%]. Today’s additional 3.5% fall in Shanghai’s composite confirmed this today. Global equities are struggling to hold current levels as the long term fundamental market forces take their toll. We expect further falls in equity markets.

With Iranian sanctions being lifted possibly this weekend the oil price looks as though it is entering the $20s next week.

We are witnessing a tidal change from 2015 in global financial markets and one that will extend through the year. The foundation for this change was laid in the last three years with government and central banks actions delaying what now appears to have been an inevitable course. The failure of government and central bank actions to stimulate global growth tells us that future global financial woes will be too much for both governments and central banks to combat. The new ‘normality’ the Fed referred to last year may well be ‘renewed’ once more. As in 2008 gold is collateral damage in the markets, but as then, this defied reason and the gold price then moved to record highs in the next few years.-  

The silver price behaved better than the gold price yesterday and may well be less volatile than gold today.

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

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