Gold demand remains solid in India and China.

Julian Phillips’ latest take on the gold and silver markets and their key drivers.

New York closed at $1,203.20 down $7.10 on Wednesday. Asia dropped it to $1,195 then London started to lift it. The LBMA Gold price was set at $1,196.00 down $15.10 on yesterday’s level. The euro equivalent stood at €1,114.37 up €0.66. Ahead of New York’s opening, gold was trading higher in London at $1,200.00 again and in the euro at €1,114.36.

The silver price closed at $16.52 down 36 cents yesterday. Ahead of New York’s opening it was trading at $16.33. The silver price is very sensitive to downward moves in gold now and strongly leads the way down.

The gold price was moved against the dollar alone, having risen slightly in the euro. The dollar continues to strengthen at $1.0750 against the Euro up from $1.0905 last week and on the dollar index to 98.36 up from 97.24 last week.

We note that the Fed minutes said that Fed officials didn’t need to see an increase in core price inflation or wage inflation before hiking rates. Further improvement in the labor markets, stabilization of energy prices or a leveling out of the value of the dollar might be enough to move rates.

We are impressed that the Fed now factors in currency values. It shows a global perspective and the vulnerability of the U.S. to events outside their shores. We have seen gold prices being moved by local U.S. factors alone and expect this to continue until global arbitrage operations in the gold market make its price considerably more efficient than it is today. With major currency/global monetary events set to start this year considerably more focus will be seen inside the U.S. on external factors from now on. We see these as gold positive.

There were no sales or purchases from or to the SPDR gold ETF or the Gold Trust yesterday. The holdings of the SPDR gold ETF are at 733.059 tonnes and at 165.28 tonnes in the Gold Trust.

Gold demand remains solid from India in particular and China.

The need in China is for an efficient arbitrage system where Chinese demand can quickly absorb gold sales in New York and London. The same can be said of India, but premiums on gold prices persist in both countries. In India, the government’s continued imposition of duties prevents this, as duties widen the spreads to the extent it is not feasible to arbitrage. In China where premiums today are low, we do expect to see, in 2015/16, such arbitrage operations set up where the large gold banks use a pool of gold to prevent any delivery delay from the import process. This will eliminate the premiums and better reflect global demand and supply balances in daily gold prices.

Julian D.W. Phillips for the Gold & Silver Forecasters - www.goldforecaster.com and www.silverforecaster.com

Indian talk turns to lower gold import duties again

Julian Phillips’ latest take on matters affecting the gold and silver markets

In India where the economy, according to the I.M.F. is a ‘bright spot’ in the global economy, talk is starting again of lower duties on gold imports. Apparently the delay and the absence in the recent budget of a lowering of duties, was due to the hope that the Indian gold buyers would turn to the various government/banking schemes to channel gold buying into them to lower imports of gold. We feel this is a polite gesture to these schemes, but their record over the last few years has been very poor, as they have been largely ignored by Indian gold investors for reasons we discussed in our newsletters of late.  The government is fully aware of the failure of these attempts, so the time they wait for duty lowering could be only a few months.  The advantage of lowering such duties would be to restrain the exchange rate from rising further and reducing any danger of a surplus on the Trade account.

We warn our subscribers that they will need to turn to a new website to get the new ‘gold fix’ on Friday. Please know that it will also only be set in the U.S. $ not in the euro and sterling as we see now. We will give details of the new process in our next issue.

Markets and SPDR Gold ETFs

New York closed at $1,154.90 down $0.30 with Asia holding it there as did London ahead of the Fixing.  The euro stood in New York at $1.06. At the Fix gold was set at $1,154.75 down $2.25 and in the euro, at €1,087.540 down €10.131, while the euro was at $1.0618 up three quarters of a cent.  Ahead of New York’s opening, gold was trading in London at $1,155.00 and in the euro at €1,088.95.

The silver price closed at $15.57 again, unchanged from Friday. Ahead of New York’s opening it was trading at $15.57.

There were no sales or purchases of gold from or to the SPDR gold ETF and none from or to the Gold Trust on Monday. The holdings of the SPDR gold ETF are at 750.670 tonnes and at 164.02 tonnes in the Gold Trust.

Gold and silver prices are seeing an increasingly tightening trading range alongside the action in currencies. Prices are in the hands of dealers who are moving them as they see the euro move. Today with the euro recovering slightly, the gold price fell when, if it had followed the pattern of the euro, it should have recovered. If more strength is seen in the euro dealers are likely to lift gold and silver prices. But do not confuse these adjustments with the strong move we are expecting in the near term.

Julian D.W. Phillips for the Gold & Silver Forecasters - www.goldforecaster.com and www.silverforecaster.com