Julian Phillips’ latest look at what’s driving the gold markets
Yesterday saw no sales or purchases into or from the SPDR Gold ETF, but a purchase of 0.46 of a tonnes into the in the Gold Trust. The holdings of the SPDR gold ETF are at 715.260 tonnes and at 166.60 tonnes in the Gold Trust.
What we have seen in the gold price for the last couple of weeks is a gold price pushed around by currencies and swinging through resistance levels as though they were not there. We draw from the picture that the gold price is sitting on support at $1,200 and whenever it tries to dip below that it is brought up sharply.
We do expect volatility in the gold price to rise in the next months ahead of the Yuan Fixing coming into operation.
As we said yesterday, “It is becoming clear that the Technical picture is not working as it has in the past when chart patterns dictated future moves.” Investors need to know why. We have mentioned in the past that Asian demand ignores the Technical picture and comes in when gold is below or around $1,200, but more than that is happening here. The gold market is evolving and will continue to do so throughout this year. Later in the year we will see a Shanghai ‘Fix’ in the Yuan. The Chinese gold market is far bigger in physical terms than most investors believe and deeply liquid, despite it being ‘buyers only’. Banks are extremely active in the gold market having woven it into the fabric of banking already. Gold is not exported, but the International arm of the Shanghai Gold Exchange will accommodate that now. So they are poised already to be a most significant part of the global gold market.
On the other side of the Pacific COMEX has seen a major exit of the big banks from trading as they once did. In the past COMEX’ net speculative long position was usually around 100 tonnes of gold for every $100 on the gold price. Now it has fallen to 100 tonnes while the gold price is at $1,200. With this drop in trading levels has come a reduction in liquidity. The dollar index is slightly weaker at 95.06 down from Thursday’s level of 95.54. The euro is slightly stronger at $1.1160 but consolidating around these levels.