Gold, Silver boosted as ECB crushes interest rates

Gold TodayGold closed in New York at $1,243.90 on Tuesday then rose in Shanghai through $1,250 and even higher in London, at the opening on Wednesday morning.

The $: € moved from $1.1346 to $1.1368 overnight. The dollar index is standing at 93.71 down from 93.90.

LBMA price setting:  $1,252.40 up from Tuesday 7th June’ $1,241.10.

Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
2016  06  08

2016  06  07







Dollar equivalent @ $1: 6.5756

$1: 6.5742





While New York took the gold price down at its opening, it subsequently took it higher to close higher. But in Shanghai it rose further as the dollar continued to weaken slightly, as did the Yuan.

Janet Yellen’s latest comments continue to be digested and greater risk factors are being factored into the future, both of the U.S. economy and the global economy. Then the World Bank came out and reduced its forecasts for global growth to 2.4% down from 2.9%, adding to the fears of greater global risks. We emphasize that it is the dollar’s exchange rate that is dictating both the future for gold and for the U.S. economy.

 The gold price in the euro was set at €1,101.69 up from yesterday’s €1,093.19

Ahead of New York’s opening, the gold price was trading at $1,253.85 and in the euro at €1,102.96.  

Silver Today –The silver price closed in New York at $16.40, down from Monday’s $16.47 a fall  of 7 cents. Ahead of New York’s opening the silver price stood at $16.77.

Price Drivers

Mario Draghi and the E.C.B. are embarking on the purchase of E.U. Corporate debt. It is estimated that 600 billion of this debt is on the markets. It is felt that this is not enough to satisfy the demand of the E.C.B.

Inevitably, this is taking yields across strong Europe to nearly zero. Will the proceeds of this debt be used to promote E.U. growth? The markets are sceptical, thinking that it is more likely that buyback operations will attract such capital. We see the program as a risky operation, particularly as eventually interest rates must rise, creating a precipitous fall in these markets.

It is an attempt to also lower the $: € exchange rate. We see this as failing as the euro is heavily undervalued currently. In addition the U.S. does not want a higher dollar against the euro and behind the scenes is preventing it. This is positive for gold and silver.

The current rise in the gold price needs to continue if gold Technicals are to change to the positive. However, the fundamentals of the currency markets are pointing to stronger gold and silver prices in the short and long term. We do not see the precious metal Technicals as being sufficient to dominate currency Technicals and fundamentals.

To appreciate the dangers of slowing global growth and global debt, take a look at auto finance debt in the U.S. and we see the very large presence of sub-prime debtors. If the U.S. does slow down, these debtors will be mired in their debt. If rates do rise likewise they will be in trouble. Shades of 2008 are appearing!

In the global sovereign debt markets the same is true, as debt to GDP ratios are rising as economies slow. The big picture is very worrying and positive for precious metals.

Gold ETFs – On Tuesday the holdings of the SPDR & gold Trust stood still, leaving the holdings of the SPDR at 881.145 and those of the Gold Trust at 196.90 tonnes.

Silver –The silver price was waiting for gold to rise slightly then stopped marking time and has sprinted forward. Should gold continue to rise, silver will go full pelt upwards.

Julian D.W. Phillips | | StockBridge Management Alliance

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