Gold and silver in tight trading range braced for the Fed

New York closed with the gold price at $1,108.70, up $0.30. This morning gold was trading at $1,108.00 in Asia again. In the euro this was 979.66 up €3.06.  This morning the dollar index started the day at 95.22 almost unchanged from 95.09 on yesterday. The LBMA gold price was set at $1,105.50 down $2.50 from yesterday. The euro equivalent was €977.54 down by €1.26. Ahead of New York’s opening gold was trading at $1,105.90 and in the euro at €977.06.  

The silver price closed at $14.44 down 6 cents on yesterday in New York. Ahead of New York’s opening silver was trading at $14.33.

Price Drivers

The entire financial world is braced for the Fed’s statement on Thursday with speculation as high as we have ever seen. Market commentators are doing their best to convince themselves that a rate rise is coming from this week’s meeting even if it is only 0.1%. That’s why the gold and silver price’s trading range has become very tight. Consequently there were no sales or purchases into or from the SPDR gold ETF or the Gold Trust, yesterday. This leaves the holdings of the SPDR gold ETF at 678.183 tonnes and 159.90 tonnes in the Gold Trust.

The Fed is charged with placing U.S. interests before those of the rest of the world, so the question is, “Will any global ripple effects affect the U.S. economy or will a stronger dollar hurt it?” This, we believe will drive their decision as to when they raise rates.

On the other side of the world, another step forward has been taken to internationalize the Yuan. Global central banks will now be allowed to deal in the Yuan. With no current Yuan holdings, this means they will be able to buy them. We expect they will buy to the extent of their trade with China and not use the dollar to buy direct from China. What will the U.S. reaction be? At the moment around 63% of central bank reserves are in the dollar with around 20% in the euro and the balance in other currencies, mainly the Yen and the Pound Sterling. Any Yuan purchases would reduce these totals. The advantage to central banks is being able to cut out the costs of using the dollar to buy Chinese goods. We also believe this precedes giving trading partners of China the opportunity of cutting out dollar costs and exchange risks by going straight to the Yuan. It is an important step and one which may well see other developments on this front.

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

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