Gold seen as attacking overhead resistance

New York closed with the gold price at $1,130.10 up from $1,125.40 yesterday. Gold rose to $1,133 in Asia and London further to $1,135.50 ahead of the fix. The dollar strengthened to $1.1149 from $1.1171 and the dollar index held at 96.23 the same as yesterday. In London’s morning the LBMA gold price was set at $1,134.45 up from $1,124.600. In the euro this was €1,012.59 up from €1,010.06. Ahead of New York’s opening gold was trading at $1,136.50 and in the euro at €1,011.26.

The silver price closed at $14.79 down 2 cents on Wednesday in New York. Ahead of New York’s opening silver was trading at $14.80.

Price Drivers
While we expect gold and silver to consolidate in a tight range today it may well attack overhead resistance at $1,140. There was a purchase of 0.596 of a tonne of gold into the SPDR gold ETF but none into the Gold Trust on Wednesday. This leaves the holdings of the SPDR gold ETF at 676.395 tonnes and 159.30 tonnes in the Gold Trust. Gold continues to consolidate within the pennant formation.

We were intrigued by a statement President Xi of China made in the U.S. yesterday. He led us to believe that there was no intention to ‘devalue’ the Yuan. What does this mean? A devaluation is where a nation’s central bank informs all that it will intervene in its foreign exchange market to lower the exchange rate of its currencies to a specific level. Recently we saw the first step by China to ‘float’ its exchange rate and allow the market to establish an exchange rate for a currency. They did not ‘devalue’ the Yuan, the market took it lower. It is clear now that China was as surprised as anyone by the fall and has stepped in to support the exchange rate of the Yuan against the dollar. Could this be called a revaluation? Has the ‘peg’ to the dollar been re-established?

China is clearly determined to get the Yuan accepted as one of the currencies that makes up the SDR of the IMF as a major step to becoming a world reserve currency. It is doing whatever it takes to make this happen, even holding up the exchange rate of the Yuan when it should fall. We may hear in November that it has succeeded in doing that, even though this may not be implemented until Sept 2016 or later. Thereafter it won’t devalue but may well allow the market to ‘float’ it lower.

President Xi also made another step on this road to please the IMF by confirming that Capital Controls are on the way to being removed. This implies full convertibility of the Yuan. The reporting of gold additions to reserves is also being done to please the IMF. All of this is gold positive!

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

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