Greek deal will keep Euro weak vs dollar

Julian Phillips’ latest Market Morning

New York closed yesterday at $1,149.30 down $5.90 with Asia and London taking it $2 lower. The dollar was stronger at $1.0934 down from $1.1011 against the euro with the dollar Index at 97.27 up from 96.66 before London opened.  The LBMA gold price was set this morning at $1,145.10 down $9.65 in reaction to the rising dollar. The euro equivalent was €1,051.08 up €3.55. Ahead of New York’s opening, gold was trading in London at $1,145.20 and in the euro at €1,051.32.

The silver price fell to $15.11 down 27 cents in New York. Ahead of New York’s opening it was trading at $15.00.

The gold market continues to see thin trade with few buyers or sellers, allowing the gold price to be nudged around by currency moves. Short positions are at extremely high levels on COMEX as Janet Yellen made it clear the Fed wants to begin a very slow and small lifting of interest rates, so as not to damage the recovery that is still vulnerable. More importantly she wants to cause as little disruption to bond and equity markets as they transition out of no rates rises, with rates at record lows, to a market where the trend change for rates will be to the upside. We see the beginning of such rises occurring as 2015 ends, not before then, as the recent economic data from the U.S. is proving disappointing. We point out that rate rises have already been discounted in the gold price as they have been hyped for years now.

Nevertheless the gold price is being nudged down as the dollar moves stronger. There were no gold ETF sales or purchases yesterday with the holdings of the SPDR gold ETF still at 709.65 tonnes and at 167.40 tonnes in the Gold Trust.

Looking back at Greece, now that it will not impact the euro exchange rate, we stand back to see the ‘big’ picture. From there we see the objective of the E.U. as it has always been was to retain the weak member links to ensure a weak euro. Without a weak euro there would have been little point in including such members, as no global trade advantage would be gained and no drawing off of E.U. trade without a ‘fixed’ exchange rate via a common currency. With Greece accepting vast loans that both lenders and borrowers know cannot and will not ever be repaid, the weakest link Greece is now locked into the E.U. and the euro structured to remain weak. The competitiveness of German and other strong E.U. member exports, is now consolidated and it gains additional competitiveness that outnumbers any loan losses to Greece by considerably more than tenfold. This will directly impact U.S. export potential in the years to come [as is being seen on aircraft already].

Silver will likely fall faster than gold, just as it will rise faster. It will not move independently of gold.     Julian D.W. Phillips for the Gold & Silver Forecasters - and

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