We have been talking about a restraint on the dollar for weeks now. The U.S. does not want a strong dollar is our theme. Having failed to break through the 100 level on the index, the advent of bad data from the ISM index falling to 53.5% from 55.8% in December and no doubt more subsequently, tells us the U.S. economy is slowing. Companies in the U.S. service sector such as retail, banking and health care grew in January at the slowest pace in almost two years.
The global economy is slowing even faster too. The low oil price is a reflection, more of slowing demand than of oversupply.
For years now the global economy has relied on a recovering U.S. economy, so now we are not looking at a flowing economic tide but an ebbing tide there. The dollar dropped heavily against all currencies and commodities and precious metals. This again is a sea change from the last 8 years and particularly prejudicial against all those currencies that have been trying to weaken against the dollar. We expect to see larger and more negative interest rate levels across the world in 2016, as competitive devaluations increase. This will be destructive to the global monetary system.
The gold and silver prices are reflecting growing demand but also the rapidly weakening dollar and still have a long, long way to go before reflecting what we have written here.
Wednesday saw another large purchase of 4.461 tonnes yesterday making purchases of over 20 tonnes this week alone! The Gold Trust saw a relatively huge 3.7 tonnes added to the Gold Trust. The holdings of the SPDR gold ETF are now at 690.051 tonnes and at 170.56 tonnes in the Gold Trust. The ongoing large purchases are forcing the gold price up. Bear in mind gold prices are driven by U.S. demand almost exclusively as Asian demand appears to fail to affect gold prices, yet. The gold price picture remains technically positive.
The gold and silver markets
The New York gold price closed Wednesday at $1,142.10 up from $1,129.60 up $12.50. In Asia on Thursday, it held there ahead of London’s opening and then the LBMA set it at $1,146.25 up from $1,130.00 up $16.25 with the dollar index down at 96.66 down from 98.64 on Wednesday. The dollar was much weaker against the euro at $1.1180 up from $1.0919 against the euro. The gold price in the euro was set at €1,025.27 down from €1,034.89. Ahead of New York’s opening, the gold price was trading at $1,146.5 and in the euro at €1,025.49.
The silver price in New York closed at $14.65 up 34 cents at Wednesday’s close. Ahead of New York’s opening, the silver price stood at $14.76.
Silver is now outperforming gold.