Gold and silver prices still have work to do

Gold Today –Gold closed in New York at $1,283.90 on Monday then it slipped in Shanghai, as you see below, then picked up again in London at the opening on Tuesday morning, to over $1,280.

The $: € moved from $1.1228 to $1.1268 overnight. The dollar index is standing at 94.46 down from 94.50.

Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
2016  06  14

2016  06  13

SHAU

SHAU

272.01

270.31

271.15

271.99

Dollar equivalent @ $1: 6.6017

$1: 6.5860

  $1,281.56

$1,276.58

$1,277.51

$1,284.52

Shanghai pulled back leaving London to lift the gold price. Is this a sign that supplies in London available to make the price are so little as to push prices up? It could be that U.S. demand is so strong that these supplies are diminishing too much. If this is the case, we should see greater volatility in the price in the near term. There is certainly enough going on in the currency world to cause such volatility.

The Yuan still continues to weaken, as expected, while the Japanese Yen is still being sought as a place to escape the dollar, the pound sterling and the euro. The currency war is being waged without relent at the moment.

LBMA price setting:  $1,279.40 down from Monday 13th June’s $1,284.10.

The gold price in the euro was set at €1,147.83 up from Monday’s €1,139.60.

Ahead of New York’s opening, the gold price surged to close to  $1,290 before settling back to the mid $1,280s

Silver Today –The silver price closed in New York on Monday at $17.42, up from Friday’s $17.30 a rise of 12 cents. Ahead of New York’s opening the silver price stood at $17.31.

Price Drivers

With the Fed meeting this week financial markets will be cautious, despite the common expectation of no rate rise. Add to this the fact that German Bunds are yielding a negative 0.00% now. The euro is weaker today as you can see above with the Yen getting even stronger. The Yuan is now 6.60 against the dollar. The weakening of the euro may well not last for long as it remains well off its recent peak weakness.

We have focused on the Brexit vote and its potential impact on markets, but we have not factored in a potentially devastating set of ‘ripple’ effects!

To be clear on this by isolating single events such as ‘Brexit’ there is a danger of ignoring collateral damage, which in turn may well create subsequent crises. For instance if heavy outflows of capital from Britain take place how will the euro be affected? Will such an event damage global growth still further? At what point in a disrupted currency world will protectionism raise it ugly head?

The scene is gold positive and consequently silver positive.

Gold ETFs – On Monday the holdings of the SPDR & gold Trust rose as 2.377 tonnes was purchased into the gold ETF, leaving its holdings at 896.295. No purchases or sales were made in the Gold Trust, leaving its holding at 196.90 tonnes.

The purchases were not sufficient to move the gold price in the U.S. as the gold price is attacking overhead resistance now. This level must be broken for gold to move to attack $1,300. We feel it will take a declining dollar to achieve this. This could prove difficult as both the pound and the euro are under downward pressure, pushing the dollar higher against them.

Silver –Silver decided it would try to climb higher yesterday as you see above. But today it is retreating and as we write is at $17.34. We treat this as still trading around $17.3, waiting for gold to break strongly either way.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

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