Huge purchases into SPDR Gold Trust boost gold price

The New York gold price closed Monday at $1,129.20 up from $1,117.30 up $11.90. In Asia on Tuesday, it slipped to $1,126.35 ahead of London’s opening and then the LBMA set it at $1,123.60 up $1.60 with the dollar index down at 98.91 up from 99.40 Monday. The euro was up at $1.0918 down from $1.0863 against the dollar. The gold price in the euro was set at €1,029.13 down from €1,032.86. Ahead of New York’s opening, the gold price was trading at $1,125.15 and in the euro at €1,030.55.  

The silver price in New York closed at $14.35 up 8 cents at Monday’s close.  Ahead of New York’s opening, the silver price stood at $14.26.

Price Drivers

Monday saw a huge purchase of 12.196 tonnes into the SPDR gold ETF but none into the Gold Trust. The holdings of the SPDR gold ETF are now at 681.425 tonnes and at 166.45 tonnes in the Gold Trust. The huge purchase was responsible for gold’s rise yesterday and took the gold price back to resistance [small] at $1,130. The gold price picture remains technically positive.

Mario Draghi’s statement yesterday surprised us with its content. He is a brave central banker made so by his calls to E.U. governments to ‘step up’ and take action to lift prospects in the E.U. Governments have been sadly lacking in this area since the start of the credit crunch in 2007. They continue to be so passing the buck to central banks. Only so much can be achieved by central bank policies and without the support of governments, eventually central banks will fail to deliver. What he said yesterday is, to us, a signal that there is little more the E.C.B. can do and they should not be ‘blamed’ for a lack of solid economic growth. This raises the prospect of failing economic strength and disunity in the E.U.

If the U.S. sees a downturn for at least one quarter the E.U. will fare far worse. The E.U. wants a weaker euro to grasp at other nations exports, but is now unlikely to get it. The real answer lies in going to the consumer and boosting his income, job security and the value of his assets. Until this happens economic prospects in the developed world are unlikely to improve.

With the Yen falling again due to negative interest rates the likelihood of a ‘currency war’ is real. China will not tolerate being expected to hold its currency up [when it should fall] while Japan is taking advantage by intentionally lowering its exchange rate. This is ‘war’ and will meet with a reaction when it suits China. China has its own Q.E. program [a rose by any other name] and to hold the Yuan up, has de facto exchange controls in position, but may well formalize these shortly. This will be positive for gold in all currencies as the ‘war’ produces casualties.

Silver should hold its gains but will be more volatile than gold.

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

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