Monetary changes to broaden gold’s global role

Julian Phillips  looks at current activity on the gold and silver markets and the longer term factors which will drive prices in the months and years ahead

New York closed at $1,186.20 up $9.70 as bargain hunters came in at low levels.  Today sees the dollar stronger at $1.1271 up from $1.1326 up half a cent against the euro with the dollar index stronger at 95.03 up from 94.67. The LBMA Gold Price was set at $1,180.50 down $5.50 with the equivalent euro price at €1,047.80 up 65 cents. Ahead of New York’s opening, gold was trading in London at $1,179.60 and in the euro at €1,047.23.

The silver price rose slightly to $16.03 up 5 cents in New York. Ahead of New York’s opening it was trading at $15.90.

While the gold price rose in New York, Asia and at London’s opening the gold and silver prices pulled back, gold to $1,182 and silver to $15.90 in the light of a stronger dollar. We made the point yesterday, “It looks like currencies are moving against gold, not gold against currencies.” This is not so much an appreciation of the stable qualities of gold as money, but the growing instability in foreign exchanges as currencies move away from being measures of value internationally, only serving that purpose locally. A look at the last year’s performance in all currencies tells a different story to its performance in the dollar. Investors who went into gold in currencies other than the dollar, have seen that gold has served them well as a wealth preserver, as their own currencies have weakened. This has reinforced their faith in gold for that reason.

The fact that gold has essentially moved sideways over the last 18 months in the dollar does not lessen that value, for up until now the dollar has been taken as the world’s leading currency against which other currencies are valued. The coming rise of the international presence of the Yuan may not be accompanied by its rise in value against the dollar [this would be against China’s interests], but the ongoing lessening of real value in currencies, will enhance gold’s value and, we feel, its price. So there are changes coming in the monetary world that will broaden gold’s role as a ‘value anchor’. We do see that happening in 2015and going forward, as foreign exchange turbulence grows.

Yesterday saw sales of 1.491 tonnes of gold from the SPDR gold ETF. Again these sales occurred as gold prices were rising but were insufficient to pull prices back. The holdings of the SPDR gold ETF are at 704.225 tonnes and at 167.01 tonnes in the Gold Trust.

Apart from such sales U.S. investor interest is not present in the gold market as their focus is primarily in their equities. As the main global economy, where very few U.S. citizens have Passports and only 1500 out of 330 million U.S. citizens emigrate from the U.S. annually, we understand the ease with which they see total dominance over everything economic. However bearing in mind that the population of the U.S. is only 4% of global population [and take only 7% of the world’s gold annually] and around 50% of the globe’s population is rapidly increasing its wealth and global economic presence, we feel it important that we take into account non-U.S. opinion on the future of gold as part of the monetary system.

Julian D.W. Phillips for the Gold & Silver Forecasters and




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