Gold and Silver consolidating as U.S. dollar bull market ending

Gold Today Gold closed in New York at $1,225.00 down from $1,241.30 on Wednesday. On Thursday morning in Asia, it rose to $1,235. London pulled it back to see the LBMA price setting at $1,233.60 down from $1,238.30 yesterday.

The dollar index fell to 94.51 down from 95.84 yesterday. The dollar is weaker against the euro at $1.1380 after yesterday’s $1.1330.

The gold price in the euro was set at €1,085.39 down from €1,092.94 on Wednesday.

Ahead of New York’s opening, the gold price was trading at $1,235.85 and in the euro at €1,085.98.  

Silver Today –The silver price closed in New York at $15.22 down 11 cents on Wednesday. Ahead of New York’s opening the silver price stood at $15.40.

Price Drivers

The Fed – End of the Dollar Bull Market With gold now consolidating at current levels, the comments by Janet Yellen continue to impact global markets with equity markets surging and dollar continuing to slip against all currencies.

Please note, we were the first to call an end to the dollar ‘bull’ market.

This view is now spreading with Janet Yellen’s comments of concern on the global economy and the strong dollar confirming the ‘official’ view. The U.S. Treasury is silent, even though it is in their department, because we believe, that with the audience the Fed has in the media, the message was given full force when she gave it. It’s the end of the dollar’s bull market, because the Fed and the Treasury want that to be so.

The Fed is telling us all that the U.S. and its dollar cannot walk its own road with the rest of the world following. It’s very much a part of the global economy and will not tolerate other nations devaluing against it. This underpins the gold price and neutralizes the so called reverse link between the dollar and gold.

This now allows investors to look at the future prospects of markets with a clear eye and look at gold. They will see peaks in equity markets soon, as these rise on factors other than prospective growth. We are in a world where growth is expected to plateau or fall as equity market rises are caused by monetary factors, not genuine growth prospects. This makes them susceptible to volatility and uncertainty.

We are hearing more and more institutions considering gold and silver as alternatives to equities and other investments.

Gold ETFs For the second time in a long time we saw sales of 1.189 tonnes of gold from the SPDR gold ETF but none from the Gold Trust, yesterday. This leaves their holdings at 819.282 and 185.88 tonnes in the SPDR & Gold Trust respectively. These sales did not move the gold price, but may have acted as a restraint on the rebound.

Silver – The silver price remains locked onto gold’s moves and rose slightly yesterday, but promises more rises shortly.

Julian D.W. Phillips | | StockBridge Management Alliance

Gold consolidating, silver rising!

Gold TodayGold closed in New York at $1,256.00 on Friday not far different from a week ago. On Monday morning in Asia, ahead of London’s opening it was pushed down to $1,244.00. London then held it there until the LBMA price setting was set at $1,244.25 down from a week ago where it was set at $1,262.25.

The dollar index continues to see new low levels and this morning stood at 95.12 down from a week ago at 96.56. We continue to hold the view that the Dollar Index goes whichever way the Treasury wants and that’s not higher!

The dollar is down against the euro at $1.1277 from last week’s$1.1106.

The gold price in the euro was set at €1,103.30 down from €1,136.50 last week. Please note that the dollar is falling at the same time as gold is, contrary to ‘normal’ behavior.

Ahead of New York’s opening, the gold price was trading at $1,247.30 and in the euro at €1,106.06.  

Silver Today –The silver price closed in New York at $15.82 up over 26 cents on the week before. Ahead of New York’s opening the silver price stood at $15.85.

Price Drivers

We had a week away on holiday near the Mozambique islands, an ideal place to be cut off from the world and re-tune our perspectives. It allowed us to see just how diverse and inefficient the gold market is when assessing the validity of the gold and silver prices.

In the U.S. we see institutions and their clients, such as Goldman Sachs holding hard to their bearish view of the gold price, based entirely on the state of the U.S. economy and the number [3] rate hikes they expect from the Fed this year. They themselves are short as are their clients, so they are ‘talking their book’.

This view is entirely U.S. oriented and places its main emphasis on a stronger dollar and its past relationship with the euro. Of course the gold market is bigger than the U.S. demand levels, but due to market structure, U.S. gold markets continue to dominate the gold price, for now! On the other hand there are major developed world institutions [e.g. JP Morgan Chase that  favor gold’s rise, that have taken a bullish stance on the gold price for similar reasons, believing there will be only one or two rate hikes and a neutral to weaker dollar. Both these views expect the U.S. gold price to continue to dominate the global gold price and for the fundamentals on gold and silver to be sidelined and almost irrelevant to their prices.

We on the other hand do see the power of gold’s fundamentals coming through to the gold price once Chinese gold market moves come to fruition, post April 19thover time. We appear to be virtually the only commentators to add impact to their moves [we discuss these in depth in our newsletters [see below for addresses].

Gold ETFs There were purchases of 20.218 tonnes of gold into the SPDR gold ETF over the last week and purchases of 1.2 tonnes into the Gold Trust over the last week. The holdings of the SPDR gold ETF are now at 818.985 tonnes and at 192.72 in the Gold Trust. These now total over 1,000 tonnes between the two. This remains well below past peaks.

We are seeing large purchases spread over time, so as not to let the gold price run ahead of itself! This leaves dealers uncertain as to whether they are going to be caught wrong-footed when prices are marked up and they attract sellers or short-sellers. This continues to allow buyers to buy the tonnages they want at lower prices. We expect this policy to continue until another source of demand in the U.S. is found. We believe that it is these purchases that are keeping prices at these levels in the U.S. We remind readers that prices are made in the U.S. for gold and silver and do not reflect the global market’s demand and supply levels.

Hence we see prices low before the U.S. opens and high in the U.S. day.

Silver – The silver price is running ahead of gold as it rises then holds its gains while gold pulls back then runs when gold rises slightly. If this trend continues, silver will continue to outperform gold, for sure.

It is clearly visible that the usual source of silver [as a by-product of base metals] is falling, so supplies are dropping. But it the silver-gold ratio that is attracting market attention as it makes silver historically ‘cheap’.

Julian D.W. Phillips | | StockBridge Management Alliance