Gold price picture remains technically positive as it turns up in the dollar

The New York gold price closed Friday at $1,117.30 up from $1,114.50 up $2.80. In Asia on Monday, it lifted it to $1,121.35 ahead of London’s opening and then the LBMA set it at $1,122.00 up from $1,112.90 with the dollar index up at 99.40 up from 99.08 Friday. The euro was down at $1.0863 down from $1.0918 against the dollar. The gold price in the euro was set at €1,032.86 up from €1,019.33 a strong surge forward. Ahead of New York’s opening, the gold price was trading at $1,122.00 and in the euro at €1,032.44.

The silver price in New York closed at $14.27 up 3 cents at Friday’s close.  Ahead of New York’s opening, the silver price stood at $14.31.

Price Drivers

Friday saw no purchases or sales to or from the SPDR gold ETF or the Gold Trust. The holdings of the SPDR gold ETF are now at 669.229 tonnes and at 166.45 tonnes in the Gold Trust. The gold price picture remains technically positive.

With Japan embracing negative interest rates on Friday the Japanese Yen confirmed it had lost its ‘safe haven’ status and fell back to over 120 to the dollar. The numbers out of Japan are negative. We do not think for a moment that the Japanese consumer, aging on average, will be incited to go out and spend after so many decades of deflation with negative interest rates. Yes, the Nikkei will rise as switches are made by institutions to equities from bonds, but underlying GDP performance will not improve on the back of this. The Yen will continue to suffer and the conservative Japanese investor will turn to gold from their currency, over time.

Now we are not only seeing the gold price rise in so many currencies as it has done for years now, it has turned up in the dollar too.

By now there are few in the gold market that believe that either the gold market in London or the silver market are “free” [meaning a true reflection of supply and demand without outside interference]. But actual ‘manipulation’ of daily prices is not the underlying cause. It is the structure of the markets in which gold and silver are priced.

In gold’s case only a small portion of gold passes through those markets to make those prices. But when in silver’s case you see it trading at $14.40 and then the “Fix” is set at $13.85 market prices become somewhat of a joke. As less and less physical metal is traded to ‘make’ prices, it is understandable that volatility should attend such prices and we see a 3.5% differential between market prices and the Fix. But the credibility of the new ‘Fixing’ systems is called into question, once more. Lower prices may benefit buyers but that sellers should accept such prices is remarkable. That’s why China is making structural changes to the global gold markets this year, so that pricing power lies in Shanghai. We mention it again as this seems to have missed the attention of the media.

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

 

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