A shortened, updated and edited version of Julian Phillips’ commentary for Tuesday which was delayed from reaching us for technical reasons.
Shanghai prices have been higher than in New York, after gold was sold from the SPDR gold ETF [see below], and London followed Shanghai’s prices, so at this stage we conclude that New York prices were considered to have been marked down too far.
A weakening dollar is at the heart of any strength there is in gold and silver prices. Once again, in the face of analyst’s opinions, we see the dollar weakening across the board, this time alongside the FOMC meeting.
While the risk to the euro is to fall to $1.07 against the dollar, the U.S. does not want to see the dollar any stronger than at present despite the state of the E.U. We reiterate that we believe the dollar’s ‘bull’ run is over.
Russia and China are now continuing to buy gold for their reserves. China, Kazakhstan and Russia simply issue local currency to their miner’s and take some or all the local gold production into their reserves. It does not leave their countries and does not pass through any international gold market. The total amount involved could be around 25% of total global gold production.
The FOMC meeting is scheduled to begin today with a statement issued on Thursday. There are few who expect a rate hike. We expect more reasons to be given as to why no rate hike is on the cards. The concept put forward by the Fed Chair Mrs. Yellen that we could see a rate hike in the ‘summer months’ is now off the table after Britain voted to leave the E.U., probably precipitating a recession in the U.K. and more than likely one in several member states of the E.U. if not the E.U. itself.
Physical demand in the U.S. remains the principal driver of the gold price, a fact that was aptly demonstrated Monday when over 4 tonnes of gold was sold from the SPDR gold ETF. This pulled the gold price to $1,314, but Shanghai took it back up with London agreeing China’s price. This is the first recent, noticeable, difference in the three global markets prices.
Gold ETFs – As noted, in New York on Monday there were sales of 4.466 tonnes of gold from the SPDR gold ETF (GLD), but purchases of 0.45 of a tonne into the Gold Trust (IAU), leaving their holdings at 958.688 tonnes and 217.99 tonnes, respectively.
Since January 4th this year, the holdings of these two gold ETFs have risen by 379.063 tonnes.
Silver –Silver prices could have a quiet time this week, until gold leads the way again.
Julian D.W. Phillips