Massive U.S. gold ETF purchases ongoing

Gold TodayGold closed in New York at $1,234.00 up from $1,233.00. In Asia on Tuesday, it rose to $1,245 ahead of London’s opening.  It was set by the LBMA at $1,240.00 up from $1,234.15.  COMEX’s pricing is giving way to Asia. The dollar index is unchanged at 98.25.

The dollar is up against the euro at $1.0873 up from $1.0895 on Monday. The gold price in the euro was set at €1,140.44 up from €1,132.77.

Ahead of New York’s opening, the gold price was trading at $1,246.05 and in the euro at €1,145.00.  

Silver Today –The silver price closed in New York at $14.80 up 15 cents.  Ahead of New York’s opening the silver price stood at $15.02.

Price Drivers

China continues to slow, but now with a reported slowdown in the services sector. While a great deal of fuss is made of China’s slowdown the growth it provides to the rest of the world was always set to diminish as it replaces manufactured imports with locally manufactured ones.  So we see no likelihood of China lifting the developed world out of its stagnation/recession. It is a long process that began 20 years ago and will continue for the foreseeable future.

Gold ETFs On Monday, in came another huge purchase of shares/gold into the SPDR gold ETF of 14.869 tonnes and a purchase of 0.90 of a tonne into the Gold Trust. The holdings of the SPDR gold ETF are now at 777.274 tonnes and at 189.42 tonnes in the Gold Trust.   With such buying of physical gold going on the gold price is now steadily building a firm base from which to spring. U.S. investors are coming round firmly to the idea of a bleak future as painted by the most august of institutions in the world. With no effective government action to change this future even in the planning stage, gold can only have a bright future.

The Indian budget was a disappointment for gold investors there. The government has added a third level of taxes, a 1% sales tax to gold purchases now. It must be noted that each tax on gold is handled by a different government department, muddying the waters even more.

But the demand for a tax number from large buyers is far more of a deterrent for Indians do not like disclosing their financial picture. The need for financial privacy there was spawned by the corrupt use of such information by bureaucrats and tax officials in the past and remains a present danger. There is, as a consequence, two financial worlds, one of which is not disclosed.

So what these taxes do is to increase the profitability of smuggling. So any reduction in ‘official’ imports is matched by increases in smuggling, now very well established and immeasurable. Hence Indian demand is now moving up on all fronts.

Pent-up demand that was held back ahead of the budget is now coming back to the market, supporting the gold price even more. With the price holding around the $1,220 - $1,250 area price sensitive Asian buyers are beginning to accept these prices and returning to the market.

Silver – Silver has re-affirmed its relationship with gold having recovered over 3% overnight. It must be understood that dealers will move prices when they feel that a fall is coming to protect themselves from buying silver when it is going to fall. When sales to them [purchases by them] arrive they don’t want to be caught long. So when their expectations are not met and they find they have to sell silver at those low prices, they quickly mark up prices even on small buying [selling by them].

Julian D.W. Phillips | | StockBridge Management Alliance

Will Indian budget deliver for gold?

Julian Phillips’ commentary on the gold and silver markets overnight and this morning and some of the issues moving precious metals prices upwards and downwards in the current environment.

New York closed yesterday at $1,208.40 up $3.80. London Fixed the gold price at $1,205.00 down $15.00 and in the euro, at €1,073.592 down €0.68, while the euro was down almost 1.5 cents at $1.1224. Ahead of New York’s opening, gold was trading in London at $1,208.10 and in the euro at €1,076.35.

The silver price closed at $16.54 no change on yesterday. Ahead of New York’s opening it was trading at $16.50.  The price has fallen back after jumping with gold and now holds the same price as it did the day before. With its trading range narrowing we could be on the brink of a large move in both gold and silver.

There were no purchases or sales into or from the SPDR gold ETF or from or into the Gold Trust on Thursday. The holdings of the SPDR gold ETF are at 771.249 tonnes and at 166.43 tonnes in the Gold Trust.

Ahead of London’s opening Asia took the price slightly higher once more, but without chasing prices.

We expect New York to do very little on the physical side today, leaving any action in the hands of traders and speculators moving prices with the dollar and euro. Even in London we expect the physical market to be relatively quiet in the absence of a major financial event.

All golden eyes are on tomorrow’s Indian budget and the potential lowering of import duties. Bear in mind that Asian buyers are not happy to buy while prices are falling and usually wait for prices to form a foundation level. As we have reported often, they are not interested in the profit potential, only ensuring they don’t pay too much for their gold. Looking at the performance of the gold price over the last two years, we see the price has formed a solid foundation from $1,180 to the current price.

The price at the moment stands at a critical juncture at $1,200, technically. The direction it takes from here is the direction it is likely to take in the longer term. This makes any gold related news more important than it would normally be because of the increased sensitivity of the gold and silver prices, at present. So this is the time gold and silver investors should pay particularly close attention to the gold market and all its facets.

Our golden eyes were drawn to the strength of the dollar yesterday as the dollar index rose to 95.12. We are mindful of the growing level of objection to the strong dollar and expect further rises to be accompanied by action to slow or stem the rise.

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

Will Asia take the gold price higher?

Julian Phillips’ latest daily commentary on what is happening in the gold and silver markets and geopolitical factors affecting the prices of gold and silver.

Ahead of London’s opening Asia made the play once again, as the gold price was lifted over $1,214 ahead of London’s opening. When we look back to last week, we saw the gold price unwilling to fall below $1,200 and that was in the absence of Chinese demand. Technical buying in the States was sufficient to hold it there, as the rest of the world was unwilling to push it down, despite the temporary resolution of the Greek bailout crisis. Now that robust demand is back in China and ahead of the Indian budget in the next week we are watching to see if Asia is simply buying at bargain prices or willing to take the gold price higher.

The Greek bailout issue in 4 months can blow open completely again, when the postponement ends. The yoke of oppressive debt will stay with Greece for a very long time unless it takes action to break free and turn its economy around by returning to the Drachma. The Greek Finance Minister has scotched such a possibility saying Greece will do all it can to stay in the Eurozone. So, right now, the Greece issue will no longer have an impact on the gold price, for at least 4 months.

Our attention now turns to India for news that will directly impact the gold price. Smuggling gold is almost institutionalized there for the history of disobeying government and its bureaucrats on gold and the dark side of Indian finances goes back more than a generation. It therefore now makes sense for the government of India to lower duties back to 2% from 10% because the volume of smuggled gold into India will now revert to ‘official’ routes and reflect on the Balance of Payments. With the much lower oil price reducing India’s trade deficit dramatically gold imports can reflect on the B of P without impacting the Rupee, indeed such action may restrain the appreciation of it. So, all eyes are now on Mr. Modi, to see if he lowers duties on gold and boosts gold imports to the country.

Markets and SPDR ETF

New York closed yesterday at $1,204.60 up $2.50. London Fixed the gold price at $1,220.00 up $13.50 and in the euro, at €1,073.660 up €11.6, while the euro was almost unchanged at $1.1363. Ahead of New York’s opening, gold was trading in London at $1,217.00 and in the euro at €1,071.87.

The silver price closed at $16.54 up 22 cents. Ahead of New York’s opening it was trading at $16.82. We suspect that the silver price will not stop following the direction of the gold price.

There were no purchases or sales into or from the SPDR gold ETF but there was a sale of 1.5 tonnes from the Gold Trust on Wednesday. The holdings of the SPDR gold ETF are at 771.249 tonnes and at 166.43 tonnes in the Gold Trust.

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