Damage done – gold and silver pause but poised

The Tsunamis haven’t struck, but are on the way. The damage has been done! Gold and silver pause ahead of strong moves!   

Gold TodayGold closed in New York at $1,326.50 up from $1,318.90 on Monday a rise of $7.60.  In Asia the gold price began to pull back and continued in London, dropping to $1,308 before reversing higher.  

  • The $: € recovered to $1.1092 from $1.1004 before starting to weaken again before New York opened.
  • The dollar index moved lower to 95.97 from 96.37.
  • The Yen recovered slightly [102.31 down from 101.70].
  • The Yuan was stabilizing to 6.645 from 6.65 yesterday.

Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
2016  06  28

2016  06  27

SHAU

SHAU

282.65

283.36

282.15

283.43

Dollar equivalent @ $1: 6.6446

$1: 6.6412

$1,323.11

$1,325.41

$1,320.75

$1,327.42

The Yuan ‘fixing’ continues to lower the Yuan against all currencies, as you can see above. The Yuan is headed lower and will continue to do so, retreating from levels it was taken to by a rising dollar. After the current pause as the full weight of the ‘Brexit” earthquake is fully assessed by global markets we expect aftershocks to strike in the financial world.

It is important for gold investors to realize that gold is simply reflecting the real weakness of all currencies, from now on. As a result of the tectonic shifts in the monetary world that have been triggered by the U.K. leaving the E.U., we have seen the first change, of many to come, in the global economy.

LBMA price setting:  $1,312.00 down from Monday 27th June’s $1,324.60.

The gold price in the euro was set at €1,200.92 down €0.040 from Monday’s €1,200.96.

Ahead of New York’s opening, the gold price was trading at $1,310.70 and in the euro at €1,183.05.  

Silver Today –The silver price closed in New York on Monday at $17.75 up from Friday’s $17.72 a rise of 3 cents. Ahead of New York’s opening the silver price stood at $17.63.   

Price Drivers

We live in a time of consequences that will bring gold into an active role in the global monetary system!

  • The economic growth in China has been at the expense of the developed world. In 2000 80% of global cash flow went to the developed world. By 2020 only 34 % will go to the emerging world. At the moment the developed world gets around 55% of the global cash flow. This is the foundation of the economic decay of the developed world.
  • The credit crisis in 2008 was a separate event of euphoric attitudes towards credit. Whether in auto finance or at government level the same view of credit persists and encouraged.
  • The developed world is experiencing severe deflationary pressures, which are ameliorated to the point where they are barely visible due to various forms of quantitative easing. The result appears to be nearly zero inflation.  We are waiting to see inflation burst upon us.  There is a point where deflation and inflation stop compensating each other and combine to trigger rocketing inflation. The classic case of this was in Germany in 1923 in the Weimar Republic. The root cause first showed itself in 2008 from which the world has not yet emerged.
  • Political institutions have either been emasculated due to ‘hung’ governments or lack of will to really promote growth. Crises initiate the process of loss of control by governments triggering further socio/political crises. Brexit appears to be a start in a long series of events which will breed further crises. [More in our newsletters – subscribe below]

We look to Europe for the next crisis. It is likely to spawn protectionism and potential capital controls as the world moves into reverse gear in the process of globalization.

Gold ETFs – On Monday the holdings of the SPDR gold ETF (GLD) again jumped 13.068 tonnes to a holding of 947.381 tonnes and the holdings of the Gold Trust (IAU) rose 0.45 of a tonne to take the holdings to 202.36 tonnes.

Since January 4th this year, the holdings of these two gold ETFs have risen 352.955 tonnes.

Silver –Silver prices are still ready to go full pelt, after this short-term consolidation.

Julian D.W. Phillips

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