China gold buying buoys market after holiday

Julian Phillips’ daily commentary on the gold and silver markets sees the return of Chinese buying now the SGE is open again after the Chinese New Year holiday

New York closed yesterday at $1,202.10 up $1.10. London Fixed the gold price at $1,206.50 up $13.00 and in the euro, at €1,062.060 up €6.892, while the euro was nearly half a cent stronger at $1.1360. Ahead of New York’s opening, gold was trading in London at $1,207.30 and in the euro at €1,063.93.

The silver price closed at $16.32 up 9 cents. Ahead of New York’s opening it was trading at $16.50. The silver price now appears to be cautiously waiting on gold and wherever gold will go, the silver price is sure to follow.

There were no purchases or sales into or from the SPDR gold ETF and a sale of 1.05 tonnes from the Gold Trust on Tuesday. The holdings of the SPDR gold ETF are at 771.249 tonnes and at 167.93 tonnes in the Gold Trust.

China is back! As you can see from the gold price demand out of Asia this lifted the gold price at one point almost $10 over New York’s closing price. We did expect a pause while the Shanghai Gold Exchange got back into its stride, but demand has begun on a strong tone. We expect it to continue as Chinese demand is not that seasonal. We did not expect a post-holiday drop-off, but simply a toned down pace. Certainly prices around $1,200 are bringing in buyers.

We see the message out of the Fed yesterday, as being, ‘no rate hike until the second half of the year, subject to wages and employment taking a strong forward movement’. The U.S. economy needs to be able to accept rate hikes without them causing a downturn in the economy. It has to be able to absorb the hikes without missing a stride. Pressures outside of the U.S. may slow down such hikes too.

The Fed believes that the U.S. economy is improving and will continue to do so, but does face dangers. Will this have a direct impact on gold? We see any perceived delay in hiking rates, as having a positive, if any, impact on the gold price. We say, ‘if any’ because the influence of the state of the U.S. economy on the gold price is lessening as we saw in the rise of the gold price today, as Chinese demand returned to the market. Indeed a wealthier U.S. with so many international problems, we see as positive for gold as U.S. Investors will have more to spend on investments.

We are expecting overall Asian demand to bear on the gold and silver prices in the next week and more.

Julian D.W. Phillips for the Gold & Silver Forecasters - http://www.silverforecaster.com and http://www.goldforecaster.com

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