Julian Phillips’ latest daily commentary on what is happening in the gold and silver markets and geopolitical factors affecting the prices of gold and silver.
Ahead of London’s opening Asia made the play once again, as the gold price was lifted over $1,214 ahead of London’s opening. When we look back to last week, we saw the gold price unwilling to fall below $1,200 and that was in the absence of Chinese demand. Technical buying in the States was sufficient to hold it there, as the rest of the world was unwilling to push it down, despite the temporary resolution of the Greek bailout crisis. Now that robust demand is back in China and ahead of the Indian budget in the next week we are watching to see if Asia is simply buying at bargain prices or willing to take the gold price higher.
The Greek bailout issue in 4 months can blow open completely again, when the postponement ends. The yoke of oppressive debt will stay with Greece for a very long time unless it takes action to break free and turn its economy around by returning to the Drachma. The Greek Finance Minister has scotched such a possibility saying Greece will do all it can to stay in the Eurozone. So, right now, the Greece issue will no longer have an impact on the gold price, for at least 4 months.
Our attention now turns to India for news that will directly impact the gold price. Smuggling gold is almost institutionalized there for the history of disobeying government and its bureaucrats on gold and the dark side of Indian finances goes back more than a generation. It therefore now makes sense for the government of India to lower duties back to 2% from 10% because the volume of smuggled gold into India will now revert to ‘official’ routes and reflect on the Balance of Payments. With the much lower oil price reducing India’s trade deficit dramatically gold imports can reflect on the B of P without impacting the Rupee, indeed such action may restrain the appreciation of it. So, all eyes are now on Mr. Modi, to see if he lowers duties on gold and boosts gold imports to the country.
Markets and SPDR ETF
New York closed yesterday at $1,204.60 up $2.50. London Fixed the gold price at $1,220.00 up $13.50 and in the euro, at €1,073.660 up €11.6, while the euro was almost unchanged at $1.1363. Ahead of New York’s opening, gold was trading in London at $1,217.00 and in the euro at €1,071.87.
The silver price closed at $16.54 up 22 cents. Ahead of New York’s opening it was trading at $16.82. We suspect that the silver price will not stop following the direction of the gold price.
There were no purchases or sales into or from the SPDR gold ETF but there was a sale of 1.5 tonnes from the Gold Trust on Wednesday. The holdings of the SPDR gold ETF are at 771.249 tonnes and at 166.43 tonnes in the Gold Trust.