Julian Phillips notes more purchases into the big SPDR gold ETFs despite the weak gold price which, in turn, was not helped by a supposed short term solution to the Greek financial crisis.
There were purchases of 2.986 tonnes into the SPDR gold ETF and 0.9 of a tonne into the Gold Trust on Friday in what we see as a Technical purchase as markets continue solely under the influence of developed world markets until the second half of this week. The holdings of the SPDR gold ETF are at 771.249 tonnes and at 167.93 tonnes in the Gold Trust. We expect current levels of the gold price and maybe lower prices to continue this week, but we believe that such prices will attract Asian demand when China is back from holiday and certainly if duties on imports of gold are lowered in the Indian budget this weekend. Until then speculators and traders eyes will be on the €: $ exchange rate for guidance on the gold price.
At the moment the euro stands at $1.1310 pointing lower after the events at the final part of last week. To say the least, the picture that came out of the extension for 4 months of the bailout to Greece, is confusing. Did the Greek government get defeated by the E.U.? Does it mean that for 4 months the two sides will thrash out a new agreement? Has Greece committed itself to staying in the E.U. irrespective of new talks? Will the brinkmanship we saw last week continue after 4 months? Can Greece still leave the E.U. if they are not happy with further talks? Certainly, to commit to staying in the E.U. no matter what, is at odds with thrashing out a new agreement. It all depends on the political strength of the new government for without an open option to return to the Drachma, the Greek government has shot itself in the foot in terms of negotiating power. Today’s list of measures the Greek government will take to move forward on reforms gives the E.U. the power to decide the way forward. Will it be enough and if not will the issue blow up again tomorrow? With politicians at the helm nothing will be straightforward.
More importantly for our readers what impact will this have on the gold price? We believe that the Greece issue will not have an impact on the gold price unless Greece’s future in the euro and the Eurozone is directly threatened, as it was last week. This cannot happen for 4 months now. Should it happen again the influence on the gold price will come through the euro against the dollar exchange rate. For now the influence on the euro’s exchange rate with the dollar will revert to the E.C.B.’s Q.E. set to start next month.
New York closed Friday at $1,201.00 down $7.40. London Fixed the gold price at $1,193.50 down $10.00 and in the euro, at €1,055.168 down €6.213, while the euro was weaker at $1.1311. Ahead of New York’s opening, gold was trading in London at $1,193.30 and in the euro at €1,055.22.
The silver price closed at $16.23 down 16 cents. Ahead of New York’s opening it was trading at $16.12. We see silver as continuing to follow the gold price and be influenced by the factors that influence the gold price. As such we expect to see lower prices until Asian demand returns to the gold market.