While certain industrial reports out of the U.S. are disappointing the U.S. economy is recovering moderately and looks like it will continue to do so. What is now important is just how resilient it will prove to be should the rest of the world see dangerously slow growth or recession. The 1.6% decline in the Japanese economy is defeating Japanese Q.E. and setting the tone for the world outside of the U.S.
The focal point of this concern is the dollar and its strength against all other currencies. If it strengthens, it will hurt U.S. exports, as was demonstrated today when Airbus got an order from India for 250 Airbus 320s and Boeing lost out. As the dollar strengthens [particularly as interest rates rise] imports become cheaper undermining U.S. goods at home.
With 75% of U.S. reserves in gold and the expectation that the rest of the world will accept dollars all the time, just how far will dollar swaps be acceptable in place of other currencies. If we see the U.S. gather foreign currencies to keep the dollar down it will be positive for gold and silver. What is sure is that it won’t take a much stronger dollar to see these strains really bite. So while the Technical picture points to a much stronger dollar, in practice that should not be allowed to happen.
There were no sales or purchases in either the SPDR gold ETF or the Gold Trust on Friday leaving the holdings of the SPDR gold ETF at 671.867 tonnes and 161.02 tonnes in the Gold Trust. Without U.S. sales of gold from their ETFs but with short positions still at record levels, commercials with minuscule shorts and rising long positions on COMEX, the pressure for the gold and silver prices to fall seems to have abated.
The gold and silver markets
On Monday New York closed at $1,117.60, up $2.40. The dollar was slightly weaker at $1.1063 down from $1.1100 with the dollar Index stronger at 96.91 up from 96.69 on Tuesday morning. This morning the LBMA gold price was set at $1,119.15 up $1.85. The euro equivalent was €1,010.93 up €5.26. Ahead of New York’s opening, gold was trading at $1,120.05 and in the euro at €1,012.20.
The silver price closed at $15.32 up 10 cents over Monday’s close in New York. Ahead of New York’s opening today it was trading at $15.20. Silver is marking time waiting for gold to lead the way.
Julian D.W. Phillips for the Gold & Silver Forecasters - www.goldforecaster.com and www.silverforecaster.com