Julian Phillips’ intuitive understanding of what is driving the global gold and silver prices
We are starting to see the world’s markets synchronizing much more now than ever before. The statement from Janet Yellen, Chairlady of the Fed, that equity markets were high, set off alarm bells all over the world’s markets. She is aware that when prices of both bonds and equities are far ahead of prospective profits and being driven up by investors seeking yield and not prospects, they are vulnerable to a crash. Translated this means that markets are in ‘bubble’ territory. The subsequent sell off across the globe may well continue. Why did she make this statement? To us it is an attempt to pre-empt a major sell off once interest rates begin rising. The Fed’s greatest fear is that once they begin raising rates markets will overreact. So expect more of such statements.
This does not explain the $10 drop in gold in China or does it? Dealers lower prices if they expect to be met by sellers because of Janet Yellen’s comments, across the world. This marking down of prices could change in a heartbeat, once any potential selling is completed. But we must be careful not to see too much in these small moves, because Chinese demand will remain unabated.
Attempts to drive gold and silver prices down continue but have been frustrated by Asian demand. This frustration is likely to continue as west battles east on this subject, but once a clear direction is determined we could see 2015 producing one of gold and silver’s most exciting years.
Meanwhile, the dollar continued to slip this morning with the dollar index falling to 94.07 against yesterday’s 94.81, but then recovering some of the lost ground. Against the euro the dollar slipped to $1.1347 from yesterday’s $1.1233. There were no purchases or sales of gold into the SPDR gold E.T.F. but there were purchases into the Gold Trust of 0.56 of a tonne yesterday. The holdings of the SPDR gold ETF are still at 741.750 tonnes and at 166.14 tonnes in the Gold Trust.
The dollar’s fall and the rise of the euro is now not only because of the news on the U.S. Trade deficit but on Janet Yellen’s statements too. Foreign Treasury holders understood that a sell-off in U.S. markets would affect them on the dollar front too. This may well remove hopes of higher levels in both bond and equity markets in the foreseeable future?