Will this week see clear direction for gold and silver?

The New York gold price closed Monday at $1,089.10 the same as Friday. In Asia on Monday, it was held at the same level as it was in London until it was set by the LBMA at $1,087.00 down from $1,090.45 with the dollar index higher at 99.21 up from 99.03 on Monday. The euro was down at $1.0867 from $1.0891 against the dollar. The gold price in the euro was set at €1,000.28 down from €1,001.24. Ahead of New York’s opening, the gold price was trading at $1,087.45 and in the euro at €1,000.69.  

The silver price in New York closed at $14.00 up 10 cents at Monday’s close.  Ahead of New York’s opening on Monday, the silver price stood at $14.03.

Price Drivers

The gold price has held at the same level this week barely moving either way. This behavior normally precedes a strong move either way. At the same time currency markets have also quietened down. The oil price has held at the $28 level despite fears that it would plunge to $25.

We are seeing a broad acceptance that in 2016 currencies will be volatile, particularly those in the emerging world. Again, we repeat this is not tied to economic performance but to solely financial/ currency/ debt factors. It is the slowing of global growth that is making the monetary world more vulnerable.

Many feel that the 6.9% GDP growth in China is better than expected and also feel that China’s demand will help the rest of the world avoid further value collapses. We note that China is developing its economy to be able to do what the rest of the world does, as well and cheaper. So to the contrary, over time, the development of China will cost the developed world dearly, as it outperforms the developed world.

The IMF has cut its global growth target from 3.6% to 3.4% pointing to recession in Brazil, falling oil prices and a too strong dollar. Last year the global economy is estimated to have grown 3.1% the worst performance since 2009. U.S. growth will fall to 2.6% down from 2.8% in the I.M.F.’s last estimate.

Monday saw no purchases or sales from either the SPDR gold ETF or the Gold Trust. The holdings of the SPDR gold ETF are now at 657.924 tonnes and at 161.46 tonnes in the Gold Trust.  This is consistent with an immobile gold price. The gold market is waiting for the delicate balance of gold demand and supply on COMEX [not the rest of the world which remains unconnected with the U.S. gold market] to be disturbed.

The silver price has decided that gold is about to rise and jumped from below $14 to its current level. Hopefully this week will see a clear direction given for silver and for gold.

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

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