Gold price under pressure in absence of Chinese demand

On Thursday New York closed at $1,125.40 down $8.20. The dollar was stronger at $1.1140 down from $1.1335 at the close, against the euro, with the dollar Index stronger at 96.34 up from 95.91 yesterday. The LBMA gold price was set at $1,125.00 down $5.05 today. The euro equivalent was €1,010.01 up €3.15. Ahead of New York’s opening, gold was trading at $1,123.30 and in the euro at €1,008.62.  

The silver price closed at $14.69 the same as yesterday’s close in New York. Ahead of New York’s opening today it was trading at $14.68.

Price Drivers

New York continues to push the gold price down in the absence of Chinese demand. We note that silver is not following this path but is moving to a very tight trading band usually synonymous with behavior ahead of a strong move either way.

With the employment figures about to be announced in the U.S. later today markets are bracing to move on their release. A figure of 220,000 is expected. Lower than 200,000 would disappoint, but over 220,000 would see a September interest rate hike move into view, according to the markets. We note that the Fed was clear that they are looking for upward pressure on wages and inflation so that they are certain the recovery really has gained traction and the prospect of 2% inflation is coming into view. But the most important feature for gold is the impact on the dollar today’s announcement will have. If the dollar is stronger [while China is closed] there will be downward pressure on the gold price again, today.

But with China back in the gold business from Monday on, we expect upward pressure to return to the gold price.

The announcement from the E.C.B. yesterday confirmed that they were willing and able and implementing more Q.E. This was the main reason for the fall of the euro. But the fall was limited to 1 cent against the dollar, far less than we think the E.C.B. wanted. The E.U. would love to see the euro trading at parity with the dollar, but it is doubtful that the U.S. would want that. We don’t see Q.E. as the panacea for a recovery in the E.U. It may even have ‘shot its bolt’ already. If Q.E. has failed to do it by now with a weaker euro, why should another dose do it? There were no purchases or sales from or to the SPDR gold ETF or the Gold Trust, yesterday. This leaves the holdings of the SPDR gold ETF at 682.595 tonnes and 161.14 tonnes in the Gold Trust.

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

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