Gold finding short term bottom?

New York closed at $1,091.10 a rise of $3.10 up from $1,088.00 yesterday. In Asia it rose to $1,093.00 before London opened. The LBMA price setting fixed it at $1,092.50 down $3.10 over yesterday. The dollar Index paused yesterday at 98.99 at the close of New York on Monday. The dollar was slightly weaker at $1.0755 down from $1.0768 against the euro.  In the euro the fixing was €1,018.89 up from €1,016.33.  Ahead of New York’s opening gold was trading in the dollar at $1,093.00 and in the euro at €1,019.35.  

The silver price closed at $14.56 down 18 cents from yesterday’s close. At New York’s opening, silver was trading at $14.50.

Price Drivers

The panic selling we expected yesterday did not come. Indeed there were no sales from either the SPDR gold ETF or the Gold Trust. What do we take from this? While we must wait for a couple of days for the market to react, it seems that the seller does not want to sell below $1,100. It also implies that there are few stop loss protective orders in the market at these levels. It may even mean that we are finding at least a short-term bottom. Technically, we need a few more days to see if we have a double bottom or a further drop.

The holdings of the SPDR gold ETF stands at 669.089 tonnes in the SPDR gold ETF and at 160.30 in the Gold Trust. As we said yesterday, “If these [sales] dry up, then the picture becomes opaque once again.”

More importantly, we look at exchange rates against the dollar. Quite remarkably many investors and traders watch only the dollar gold price. But non-U.S. investors usually are bound by their own currencies. For instance if we look at gold prices in the South African Rand we see over the last two years since Oct 2013 the exchange rate against the dollar of the Rand has gone from R6.30 to today’s R14.30. Despite the pull back in the dollar gold price the Rand gold price has soared over that time.

Once again this emphasizes the pricing power over gold lies in a non-physical gold market.  But this is a reality that we must live with on the day-to-day basis.

The bigger reality is that gold continues to move eastward in vast quantities and will continue to do so for the foreseeable future. This means developed world stocks are falling as fast a currency reserves are finding their way to the east.

On that front we note that the dollar has not yet risen above 100. As we said yesterday, “A dollar index of over 100 is just not in the interests of the U.S.”

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

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