SPDR Gold

If government trusts gold so much, shouldn’t you?

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Gold Today –Gold closed in New York at $1,244.10 down from $1,256.00 on Monday. On Tuesday morning in Asia, ahead of London’s opening it was pushed higher to $1,258.00. London pulled it back to see the LBMA price setting at $1,251.80 up from $1,244.25 yesterday.

The dollar index rose today to 95.61 after yesterday’s 95.12. More institutions are now accepting that the dollar’s bull run is over.

The dollar is stronger against the euro at $1.208 up from yesterday’s $1.1277.

The gold price in the euro was set at €1,116.88 up from €1,103.30 yesterday. Now the gold price is rising with the dollar again, contrary to ‘normal’ behavior.

Ahead of New York’s opening, the gold price was trading at $1,254.00 and in the euro at €1,116.95.

Silver Today –The silver price closed in New York at $15.86 up 4 cents on yesterday. Ahead of New York’s opening the silver price stood at $15.90.

Price Drivers

The gold price jumped $14 this morning as the dollar strengthened slightly. ETF buying is still underpinning prices in this volatile U.S. gold market. This is expected to be an ongoing pattern in the days ahead.

We usually hear two criticisms of gold, first that it gives no yield and second that it is bought in times of uncertainty.

As we see negative yields popping up in several countries and likely more to come, gold is now ‘yielding’ more than such currencies. Mervyn King, ex-Governor of the Bank of England, pointed out yesterday that interest rates are now a central bank tool to lower exchange rates. It is traditional thinking to believe that yield is very important and they will run to deposits as low-risk places to park savings. Today, such thinking is almost irresponsible, because you could deposit your money in the U.S. dollar, say, a month ago, to get a miniscule annual yield [before fees] and see it fall 4%+ within just a month! It’s worse in most other currencies! Gold, meanwhile, is an anchor to value.

As to gold being bought in times of uncertainty, what uncertainty? Economic uncertainty, or currency uncertainty? We suggest that it is currency uncertainty, which reflects central bank handling of currencies and their values. In each country this is different. With the dollar bull market now over, other currencies are going to struggle to fall, but all are likely to fall against gold as global currencies continue to fall, but not so much against each other, but in credibility.

In the developed world, there is a point at which investors will want to turn to gold heavily, but likely it will be too late to get low prices, as Asia has been sucking up available supplies for years now.

The classic example of distrust in a government controlled financial system is India, where distrust of government and banking has led to the population having an alternative financial system based on property and gold, usually out of sight of the government, because of the corrupt system of financial policing and bureaucratic interference.

In the developed world, trust in government and the banking system is complete, with the banking system essentially controlling all our transactions and taking fees from them. Until 1933 gold was an alternative, but this was removed as such, by confiscation. What happened to that gold? Government in the U.S. banned its use by individuals for 41 years and placed it in their reserves. Why? Governments needs that gold as insurance against their potential failure in managing currencies. If government trusts gold so much, shouldn’t you?

Gold ETFs There were purchases of 2.676 tonnes of gold into the SPDR gold ETF yesterday but no change in the Gold Trust. The holdings of the SPDR gold ETF are now at 821.661 tonnes and at 192.72 in the Gold Trust. While the purchase of gold into the SPDR gold ETF was significant it was not a huge amount relative to recent purchases. What is significant is that these sales did not touch gold prices until this morning in Asia.

Silver – The silver price continues to run ahead of gold and is showing a sterling performance today. It hasn’t broken away from gold yet and remains reliant on gold to give it direction. We continue to believe it is priced as a monetary metal, not on its fundamentals.

 

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

 

Gold vaulting upwards as U.S. physical demand continues

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Gold Today –Gold closed in New York at $1,262.20 up from $1,240.90. In Asia on Friday, it moved higher to $1,266 ahead of London’s opening. In London it moved higher, but at the LBMA price setting it jumped to be set at $1,271.50 up from $1,241.95 yesterday. The dollar index is lower at 97.52.

The dollar is down against the euro at $1.0981 from $1.0879 yesterday. The gold price in the euro was set at €1,157.91 up from €1,141.60.

Ahead of New York’s opening, the gold price was trading at $1,264.00 and in the euro at €1,152.23.  

Silver Today –The silver price closed in New York at $15.22 up 27 cents.  Ahead of New York’s opening the silver price stood at $15.32.

Price Drivers

Global Equity markets continue to rally today. Is this because the future is much brighter or are the falls overdone?  Whatever it is, we can’t see an alteration in the longer term picture when the falls began [leaving dark clouds on the horizon].  When gold and equities move up together we do not read a great deal into it as the relationship between the two is a long term one. We see the weakening dollar having more impact on gold and it is now nearly a cent weaker than yesterday. So the reason that gold rose on the day was the change in direction of the dollar a U.S. factor, which again we forecast.

Gold is now seeing the strong move we forecast.

Gold ETFs An amount of 4.758 tonnes of gold was bought into the SPDR gold ETF and a purchase of 0.63 of a tonne into the Gold Trust. The holdings of the SPDR gold ETF are now at 793.332 tonnes and at 190.77 tonnes in the Gold Trust.   The weight of physical gold buying via the States into the London gold market is now heavy. It is even heavier than the tonnage withdrawn from the Shanghai Gold Exchange on a daily basis.  Such weight of buying, points to institutional buying on a persistent basis.

With so much gold having been absorbed into Asia and India supplies are short in the developed world. So if there is a body determined to hold prices down, they are paying a very heavy price in terms of market liquidity, in London, in particular. Now, U.S. investors will have to pay up to get supplies. Asia does not like rapidly rising prices so holds back when they go that way, leaving space for U.S. buyers to move in. U.S. buyers like to buy on a rising market.

Those gold investors calling for gold to be sold are being bitten hard, so today may well see short covering and then taking long positions, but at a price!

Silver – The silver price is well back over $15.00 and is racing to catch gold up as we said it would yesterday.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

And still the U.S. gold ETF buying goes on

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Gold Today –Gold closed in New York at $1,240.90 up from $1,232.70. In Asia on Thursday, it held slightly higher at $1,241 ahead of London’s opening. It then held there to be set by the LBMA at $1,241.95 up from $1,229.35. The dollar index is slightly lower at 98.21 down from 98.45.

The dollar is down against the euro at $1.0879 from yesterday’s $1.0853 on Thursday. The gold price in the euro was set at €1,141.60 up from €1,132.78.

Ahead of New York’s opening, the gold price was trading at $1,243.25 and in the euro at €1,142.80.  

Silver Today –The silver price closed in New York at $14.95 up 11 cents.  Ahead of New York’s opening the silver price stood at $14.95.

Price Drivers

Equity markets continue to rally today. But as the trading range tightens and the gold price moves to the top of the trading range, the prospects of a strong move happening comes closer. The tightening of the trading range implies a balancing between U.S. COMEX gold market buyers and sellers. Just as with a see-saw, once in balance, it takes a tiny amount on one or the other side to make the see-saw to move strongly one way or the other. We expect the trigger for this move to come out of the U.S.

London’s gold market is being bid for and there are two main contenders, apparently, the LME and the CME. The LME is owned by Hong Kong Exchanges and Clearing giving London a direct link to the Chinese market. For the London Bullion Market Association to remain relevant, it needs a link to the biggest physical gold market in the world. For it to go CME’s way it would be tied to the U.S. primarily paper market. Just as London is the developed world’s hub for Yuan trading so a tie to China’s gold market through the LME would keep London ‘relevant’ in the global gold market. This would enhance the structural reforms of the gold market being carried out in China and London right now.

So, if the bid goes the way of the CME, we would expect a divided global gold market. If the way of the LME we would expect the London gold price and the Shanghai gold price to far better reflect the demand and supply fundamentals than is the case at the moment!

Indian Gold Markets are on strike! As of now the Indian gold market is on strike against the 1% gold sales tax. This means that 35,000 jewelers across India including 7,000 in Chennai have downed tools.

The last time such a strike occurred, the government backtracked. Will they this time?

Gold ETFs An amount of 2.379 tonnes was bought into the SPDR gold ETF and a purchase of 0.27 of a tonne into the Gold Trust. The holdings of the SPDR gold ETF are now at 788.574 tonnes and at 190.14 tonnes in the Gold Trust.   But yesterday was different than the other days we saw in the week, because the equity rally continued and yet so did the gold buying.

Silver – The silver price lowered its volatile swings yesterday an rose with gold but still remaining under $15.00. If gold does jump $20 or just under 2% silver is likely to jump around 5%.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

Gold falls despite big continuing physical buying in the U.S.

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Gold Today –Gold closed in New York at $1,232.70 down from $1,234.00. In Asia on Wednesday, it fell to $1,224 ahead of London’s opening. It then rose further to be set by the LBMA at $1,229.35 down from $1,240.00. The dollar index is slightly higher at 98.45.

The dollar is up against the euro at $1.0853 up from $1.0857 on Wednesday. The gold price in the euro was set at €1,132.78 down from €1,140.44.

Ahead of New York’s opening, the gold price was trading at $1,231.00 and in the euro at €1,134.25.  

Silver Today –The silver price closed in New York at $14.84 up 4 cents.  Ahead of New York’s opening the silver price stood at $14.85.

Price Drivers

Equity markets have been rallying this week and may well continue to do so today. Dealers continue to pull gold and silver prices back in expectation of price falls while these equity rallies continue across the world. But this is not warranted in terms of the demand and supply of gold.

Dealers do not respond to physical buying as we explain below [ETFs], the Technical picture continues to describe a tightening of the trading range. We were premature in calling for a big price move either way coming, but the Technical picture continues to support our view that we are getting closer to that move.

Gold ETFs In yet another amazing week for gold demand in the U.S. and after Monday’s huge purchase of gold into the SPDR gold ETF of 14.869 tonnes we see another 8.921 tonnes bought yesterday and a purchase of 0.450 of a tonne into the Gold Trust. The holdings of the SPDR gold ETF are now at 786.195 tonnes and at 189.87 tonnes in the Gold Trust.   And yet because of better data out of the States and an equity market rally, gold fell.

Readers may feel that when there are such purchases the U.S. price of gold should rise automatically. But that’s not the way it works. HSBC is the Custodian of SPDR gold, so when the SPDR asks it to acquire gold for the company, HSBC must go into the physical market to buy it. It goes primarily into the physical market, most likely in London [if not from its own sources] to get it – not into the U.S. to get it. As a result, such demand does not impact the U.S. price of gold, initially. Now you have a situation where the supply and demand picture in gold is not reflected in the U.S. gold price, despite the fact that it is U.S. buyers of physical gold that are buying so much. Yes, it is inevitable that at some point their buying will reflect in the gold price.

This makes the establishment of the Yuan gold price “Fixing” in Shanghai after April 19th so important to the future gold price.

Silver – While the silver price has re-affirmed its relationship with the gold price, it remains more volatile than gold both ways. Clearly, for short term trading silver can be more rewarding or damaging, than gold, but we bear in mind that long-term it continues to be treated as a monetary metal.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

Gold bears fighting a losing battle!  

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Gold Today –Gold closed in New York at $1.229.20 up from $1,225.00 on Wednesday. In Asia, it rose to $1,241 ahead of London’s opening. It then pulled back during the morning to be set by the LBMA at $1,235.40 up from yesterday’s $1,232.25. The dollar index is slightly weaker at 97.44 up from 97.77 on Wednesday.

The dollar is weaker against the euro at $1.1028 up from $1.0978 on Wednesday. The gold price in the euro was set at €1,120.24 up from €1,122.47.

Ahead of New York’s opening, the gold price was trading at $1,236.55 and in the euro at €1,120.62.  

Silver Today –The silver price closed in New York at $15.24 down 2 cents.  Ahead of New York’s opening the silver price stood at $15.20.

Price Drivers

Wednesday saw a purchase of 8.029 tonnes into the SPDR gold ETF and a purchase of 0.75 of a tonne into the Gold Trust. The holdings of the SPDR gold ETF are now at 760.323 tonnes and at 188.25 tonnes in the Gold Trust.  In the week to date, we now see a total of 55.379 tonnes of gold bought into the two gold ETFs we follow.

The technical picture did as we forecast and broke out convincingly.

The gold price hit $1,250 at one point before being dragged down to $1,229, yesterday.

Let’s assume that this was due to physical selling by U.S. bullion banks. The tonnage bought this week must have put a serious dent in the gold holdings that can be used for trading. Should the buying continue at anywhere near these levels, we would question the wisdom of using such amounts of gold simply to hold the price down. The evidence in the physical markets is that Asian demand is so large that such a policy is doomed to fail.

If however, the price of gold yesterday was simply a function of the COMEX futures and Options contracts then physical gold was not involved. The achievement of holding gold prices back would then be to encourage more physical buying of gold globally, both in the developed world markets and off-market where the bulk of physical gold is traded. The price off-market is referenced to London and COMEX prices. By holding prices down [with the fall from $1,250 to $1,229] would simply incite more buying!

While global growth continues to slow, we note that the Services sector in China is still growing fast. This is directly helping to create more middle class Chinese citizens. These continue to love gold as a fundamental investment. The performance of the Shanghai Composite index remains uninspiring, so solid, safe gold that the older people promote, holds a fundamental position in middle class wealth. The slowing GDP numbers from China belie such growth, but this is and will be a fundamental driver for gold for many years ahead.

Silver – While the silver price was restrained overall yesterday, gold’s breakout will positively affect silver’s performance from now on.

 

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

More huge gold purchases into US gold ETFs – almost 46 tonnes in 2 days

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Gold Today –Gold closed in New York at $1,207.50 down from $1,229.30 on Monday. In Asia, it rose back to $1,217 ahead of London’s opening. It fell back but then recovered in London and at the LBMA price setting it was set at $1,218.75 up from $1,203.65 yesterday. The dollar index is slightly weaker at 97.42 up from Monday’s 97.52.

The dollar is stronger against the euro at $1.1003 up from $1.1024 on Monday. The gold price in the euro was set at €1,106.97 up from €1,091.80.

Ahead of New York’s opening, the gold price was trading at $1,217.05 and in the euro at €1,106.16.  

Silver Today –The silver price closed in New York at $15.16 down 20 cents.  Ahead of New York’s opening the silver price stood at $15.22.

Price Drivers

Monday saw another purchase of 19.331 tonnes after Friday’s purchase of 19.332 tonnes into the SPDR gold ETF and a purchase of 3.00 tonnes after Friday’s 4.00 tonnes into the Gold Trust. The holdings of the SPDR gold ETF are now at 752.294 tonnes and at 187.50 tonnes in the Gold Trust.

In the SPDR [GLD] gold ETF we are clearly seeing a very large institution buying heavily on an ongoing basis. Again, we see in one day purchases of 22.331 tonnes of gold into the two main gold ETFs in the U.S. Yesterday saw purchases by U.S. investors of 23.332 tonnes of gold, into the funds.

We still don’t believe that the gold price is reflecting these purchases. If these had happened over a week we would have opined that they were extremely good weeks of gold purchases. So we ask, “Is this an institution like Paulson’s funds buying back holding sold in the last quarter or another aggressive U.S. fund. Or it could be a Chinese institution stocking up its holdings held outside China?”

These are very large amounts for the gold market, big enough to drive the gold price higher once market liquidity is squeezed. Nobody can say when this will happen but it must be close.

To give you perspective, the Chinese and Russian central banks each bought over 20 tonnes in a month. U.S. investors bought more than the total bought by these two in just two working days.

In the background we are seeing the gold market change structurally and in its direction. As we say above, it is a matter of liquidity in developed world markets. Something must give if this weight of buying continues!

Silver – Silver price volatility is being seen in line with the volatility in gold. This tells us that if gold does run higher, silver will follow it or run ahead of it.

 

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

Huge US Gold ETF Purchases. Dual global gold market developing?

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Is a dual global gold market developing?

Gold Today –Gold closed in New York at $1,229.30 on Friday down from $1,236.80 on Thursday. In Asia, quite unbelievably, it slipped back to $1,210 ahead of London’s opening. It kept falling in London and at the LBMA price setting it was set at $1,203.65 down from Friday’s $1,221.50. The dollar index is stronger at 97.52 up from Friday’s 96.88.

The dollar is stronger against the euro at $1.1024 up from $1.1102 on Friday. The gold price in the euro was set at €1,091.80 up from €1,100.25.

Ahead of New York’s opening, the gold price was trading at $1,210.35 and in the euro at €1,097.87.

Silver Today –The silver price closed in New York at $15.36 then in Asia it was pulled back to $15.02 down 34 cents.  Ahead of New York’s opening the silver price stood at $15.07.

Price Drivers

Friday saw purchases of 19.332 tonnes into the SPDR gold ETF and a purchase of 4.00 tonnes into the iShares Gold Trust. When we saw this number we thought we had made a mistake so we double checked. The numbers are correct. What is strange is that we can’t find anybody who noted this huge number. Physical gold purchases are rising in volume into these two, U.S.-based gold ETFs as gold continues to consolidate in a pattern promising a strong move shortly. The holdings of the SPDR gold ETF are now at 732.963 tonnes and at 184.50 tonnes in the Gold Trust.

We find it somewhat unbelievable that US. Investors should buy 23.332 tonnes of gold into their two main gold ETFs on Friday and then in Asia the price falls back $19.  The U.S. gold market is readying for a strong move shortly, still.

So we have to ask, “How can the prices in Asia fall so much, while New York and London are closed?” It is evident that there is little to no effective arbitrage capacity in the global gold market. China forbids the export of gold, so there is no chance that a smoothing of the gold price can come from Chinese sellers in New York or London. But liquidity levels in Shanghai are sufficient to see gold sales there with no price-chasing. Altogether Shanghai appears a more stable gold market now with less volatility.

With Chinese and Indian wholesalers buying as much gold as they can, confident that the retail and institutional buyers will be there soon thereafter, on an ongoing basis, supplies for the open market in the developed world are under strain. The volatility on the gold price in New York bears clear testament to this. As you can see even now prices fall in Asia and rise in New York substantially! If we are correct on this, then we have to expect continued and rising volatility in the weeks ahead, in daily prices.

So will there be two separate and very different gold prices across the world in the future?  We discussed, in our newsletters, the developments both in and outside China in terms of the structure of the global gold markets being undertaken by the Chinese institutions. We see these as developing effective arbitrage operations, under their control. That means that the absorption of London’s liquidity in the gold market will accelerate.

Asians do not chase prices, they always want to know it won’t go lower and then they buy. With the huge growth in Chinese Middle classes, ongoing demand for gold in China will grow too. So price dips will become increasingly rare and a steadier, less volatile market will evolve in Shanghai if this market evolution continues.

But until then, we will see daily prices between morning and evening, remaining volatile.

Silver – With the fall in the silver price in Asia being so heavy this morning, we expect to see a similar but upward volatility in New York.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

Gold pawing the ground as ETFs continue to build

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Gold Today –Gold closed in New York at $1,236.80 up from Thursday’s $1,208.20. In Asia, it started to slip back and kept slipping in London’s morning until the LBMA set it at $1,221.50 up from $1,204.40 up $17.10 at yesterday’s setting. The dollar index is barely changed at 96.88 after yesterday’s level of 96.85.

The dollar is slightly stronger again, against the euro at $1.1102 up from $1.1116 on Thursday. The gold price in the euro was set at €1,100.25 up from €1,083.48.

Ahead of New York’s opening, the gold price rose to $1,231.70 and in the euro at €1,108.24.  

Silver Today –The silver price stood in Asia at $15.49 up 22 cents at the close in New York.  Ahead of New York’s opening the silver price stood at $15.46.

Price Drivers

Thursday saw purchases of 2.677 tonnes into the SPDR gold ETF and a purchase of 1.11 tonnes into the Gold Trust. Physical gold purchases are returning into these two, U.S.-based gold ETFs as gold now consolidates in a pattern promising a strong move shortly. The holdings of the SPDR gold ETF are now at 713.631 tonnes and at 181.50 tonnes in the Gold Trust.

With U.S. investors now firmly on the buy side, gold is ‘pawing the ground’ ready for a strong move. We believe this move will catch most market professionals off-guard and delineate where gold and by extension, silver prices are headed now.

Volatility comes most strongly when liquidity levels are low. The 3%+ moves of the gold price both ways in the gold market on COMEX, in the last few days in particular, are clear indications of this. To us this is also a sign that New York’s pricing power is falling. London, where liquidity is higher sees prices move in smaller ranges and it continues to pull prices back or up because of this. But with the large amounts leaving London for Switzerland [for refining into metric measurements] and directly to Asia liquidity is slowly but surely being reduced there too.

Most commentators are ignoring the developments coming in the Chinese gold market that are to start in April. These are structurally important to the gold price.

Silver – The silver price is robust with American investors confident silver will not fall soon.

 

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

Gold may have found a foundation above $1,200.  

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Gold Today –Gold closed in New York at $1,208.20 up from Tuesday’s $1,199.60. In Asia, it held close to that level, but pulled back to $1,204 in London to be set at over $1,212 this morning but then slipped back to $1,204 before London opened. Then the LBMA set it at $1,204.40 up from $1,202.00 up $2.40, with the dollar index stronger at 96.85 up from Monday’s 96.54.

The dollar is slightly stronger again, against the euro at $1.1116 up from $1.1144 on Wednesday. The gold price in the euro was set at €1,083.48 up from €1,078.51.

Ahead of New York’s opening, the gold price was trading at $1,207.15 and in the euro at €1,087.82.  

Silver Today –The silver price stood in Asia at $15.27 up 5 cents at the close in New York.  Ahead of New York’s opening the silver price stood at $15.32.

Price Drivers

Wednesday saw no purchases into the SPDR gold ETF but a purchase of 0.80 of a tonne into the Gold Trust, still waiting for gold to build a bottom. The holdings of the SPDR gold ETF are now at 710.954 tonnes and at 180.39 tonnes in the Gold Trust. Investors into these ETFs are certainly not sellers right now.

The gold price is holding over $1,200 settling and building a bottom there. This is reassuring bulls and worrying bears. We take note of the fact that U.S. investors have turned bullish on the physical side and we take further note that U.S. investors are not in a position to drive the gold price down with large physical sales. The ongoing weighty exports from London to Switzerland and to the Far East add to the draining of liquidity from the gold market in favor of Asia. Likewise, China’s demand at 215 tonnes of gold in December 2015 confirms just how great that demand is!

In India, current demand when extrapolated points to 1,000 tonnes being ‘officially’ imported ignoring a vast amount over and above that through smuggling into the country to gain the 10% of unpaid duties.

When totaled for 2016 we see a picture of ongoing demand into Asia taking all of the newly mined gold supplies off the market. Against this, how can sellers dominate the prices of gold and silver?

The Fed and Japan

The news out of the Fed Minutes and out of Japan gives some clarity on the way forward for the gold and silver prices. The Fed’s worry and uncertainty on the way forward for the U.S. economy, due to influences outside the U.S. is new to the usually introverted and myopic investor opinions. While such a viewpoint is new, it is likely to be a feature of Fed and Treasury actions going forward. U.S. investors are used to the nation leading the world on the economic and monetary fronts. For investors to recognize that the U.S. is very much a part of the global economy and influenced by it is a difficult departure for them.  To us it is a forerunner to major structural changes in the monetary world.

As to Japan’s disappointing export performance [falling 14%] just reported, this confirms that it will take far more than monetary stimuli and exchange rate weakening action to bring about an economic revival in Japan. With the dislike of Japan by China, the current driver of global growth, these numbers are indicative of a much longer term picture.

Silver – The silver price continues to hold strongly above $15.00 and we expect will do so while gold is in this Technical pattern.

 

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

Gold and silver on pause – waiting for physical buying!

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Gold Today –Gold closed in New York at $1,199.60 but stood, in Asia, at over $1,212 this morning but then slipped back to $1,204 before London opened. Then the LBMA set it at $1,202 down from $1,212.00 down $10.00, with the dollar index stronger at 96.85 up from Monday’s 96.54.

The dollar is slightly stronger against the euro at $1.1144 up from $1.1171 on Tuesday. The gold price in the euro was set at €1,078.51 down from €1,084.95.

Ahead of New York’s opening, the gold price was trading at $1,207.40 and in the euro at €1,084.34.  

Silver Today –The silver price stood in Asia at $15.22.  Ahead of New York’s opening the silver price stood at $15.30.

Price Drivers

Tuesday saw no purchases or sales from or to the SPDR gold ETF or the Gold Trust, clearly waiting for gold to hit support. Their intention appears to be to buy at the best prices they can and not chase any price. The holdings of the SPDR gold ETF are now at 710.954 tonnes and at 179.19 tonnes in the Gold Trust. We don’t believe that after such strong buying investors have moved out of the market. We believe that they are readying to start buying the shares of the SPDR gold ETF soon.

China too appears to be waiting for the gold price to settle down, although while they could during the Lunar New Year holiday they piled into the shops to buy gold. Chinese demand remains robust. We also expect the post holiday fall-off in demand to be slight with lower prices and ongoing enrichment of the middle classes.

But yesterday saw the gold price hold lower levels because of the absence of gold ETF buyers in the U.S. Now that the gold price is bouncing off support at $1,200 we expect physical demand to come in again.

The media appears obsessed by growth in China and the Yuan exchange rate as though they are the factors hurting the developed world. We believe nothing could be further from the truth. China will internalize its debt problems and growth problems as they continue to change direction towards consumption and the development of the middle classes. It is a process the developed world has not seen since the Second World War. Such a process limits imports from the west.

Bear in mind the Chinese government rules the entire financial system there with an iron hand, unlike in the west. A 1% or 2% move, both ways this week, of the Yuan, are of no consequence!

The basic problem the developed world is facing is that global cash flow to itself is dropping over time from the 80% it enjoyed in 2000 to the eventual 35% in 2020. As of now its global cash flow is between 40% and 45% going to Asia and 55% to 60% to the developed world. The road forward is to see China and Asia producing all products that the west does, as well and cheaper.

China wants to become the No. 1 economy as independent of the Developed world as possible, to remove its vulnerability to it. This will divide the world and bring intense pressure on the developed world, long term. It is inevitable that this will bring additional financial and currency pressures to the globe.

With this in mind China is, through its citizens and institutions, buying as much gold as it can, as it foresees the day when gold will reinforce a failing global monetary system.  But even there, the government can, at the drop of a hat, confiscate the bulk of their gold. The Chinese are so obedient or fearful of government that they will hand in their gold if told to do so by government. Bear in mind too that Hong Kong is part of China.

Silver – The silver price is holding strongly above $15.00 and we expect will do so while gold is in this Technical pattern.

 

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

 

Extraordinary developments in the Gold Market: China pulling it down!

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Gold Today –The New York gold price closed Friday at $1,238.20 down from $1,244.20 as the market took a breather after the stunning rise of last week. On Monday, with China [open after the week long holiday] prices were pulled back to $1,212, ahead of London’s opening. Then the LBMA set it at $1,208.45 down from $1,239.50 down $31.05 with the dollar index stronger at 96.36 up from Friday’s 95.70.

The dollar is stronger against the euro at $1.1203 up from $1.1283 on Friday. The gold price in the euro was set at €1,078.68 down from €1,098.56.

Early afternoon in London, the gold price was trading at $1,209.35 and in the euro at €1,079.01.  

Silver Today –The silver price in New York closed at $15.72 up 2 cents on Friday.  Early London’s afternoon the silver price stood at $15.30.

Price Drivers

We see an extraordinary situation in the gold market first thing Monday morning.

China has re-opened and New York is closed today. When the Chinese went on holiday at the end of the week before last the gold price was fixed in London’s pm at $1,150.35. Now they return to hear that gold actually hit $1,250+, $100 higher than when they left on holiday.  On top of that, they were ready for a weaker Yuan, but return to find a huge trade surplus and a Yuan stronger by 1%. But the Chinese middle classes don’t move gold for such a small reason. It is more likely that while there will be a ‘shunt-effect’ in gold prices, gold investors there, need to get back in gear before their opinion on prices feeds through.

Of course speculating traders would think it was time to take a profit or so dealers would expect. So prices were pulled back in expectation of this. With New York closed today, U.S. demand is out of the way, leaving the Chinese to get used to these much higher prices until the U.S. returns.

Contributing to the fall in the gold price is the strengthening dollar causing dealers to mark gold prices down.

When the U.S. returns they will be used to prices at the $1,240 area. This will provide a measure of the either disjoint or efficiency of arbitrage to smooth prices in the two markets. Just how far apart are these two markets and just how far can arbitrageurs remove the differences? This will tell us just how global, the gold market is.

Bear in mind the Chinese market has just accepted a $62 rise [with gold prices at $1,212] today and not driven it lower. It may lead to a quick acceptance by them of higher prices this week. Nevertheless, such a correction back to support just above $1,200 is healthy and needed for the gold price to be able to rise solidly.

Friday saw understandable profit taking with a sale of 5.057 tonnes from the SPDR gold ETF but a relatively huge purchase of 4.41 tonnes into the Gold Trust. The holdings of the SPDR gold ETF are now at 710.954 tonnes and at 179.19 tonnes in the Gold Trust. The net result was relatively gold price neutral in New York. The move into the much smaller Gold Trust was the highest one day purchase we have ever seen. We expect the U.S. investors to be buyers when they return tomorrow.

China’s equity market is now in a bear market and with Japan reporting a 1.4% GDP shrinkage, the market opinion is that Abenomics is not working.  Adding to the gloom the rally in the oil price is going to be undermined by the first shipment to Europe of oil this week from Iran.

While the silver price is retreating, it is holding onto the bulk of its gains and clinging close to the gold price still.

 

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

Gold cat out of the bag

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Gold Today –The New York gold price closed Thursday at $1,244.20 up from $1,196.50 up an incredible $47.70. Ahead of London’s opening, prices were being quoted at $1,244. Then the LBMA set it at $1,239.50 up from $1,223.25 up another $16.25 on top of yesterday’s $39.85 with the dollar index slightly stronger at 95.70 down from 95.51 on Thursday.

The dollar is stronger against the euro at $1.1283 down from $1.1322 on Thursday. The gold price in the euro was set at €1,098.56 up from €1,080.42 up another €18.14 on top of yesterday’s €29.44.

Ahead of New York’s opening, the gold price was trading at $1,241.65 and in the euro at €1,100.17.  

Silver Today –The silver price in New York closed at $15.70 up 42 cents at Thursday’s close.  Ahead of New York’s opening, the silver price stood at $15.68.

Price Drivers

The move in the gold price yesterday did more than dumbfound the markets yesterday. It has destroyed most developed world concepts of how markets behave. A rise of this magnitude through such huge resistance, that has proved insurmountable for nearly three years, breaks all the rules. Anybody that thought it had mastered the management of the gold market or any structural isolation of the gold price to the U.S. has been thrown out in one day. We have expected this for a very long time, but the demand to do this was just not there in the U.S. As physical supplies dwindled to remarkably low levels in the U.S. it became clear that just a relatively small burst of demand would break through these concepts. But to see in one day such a breakout stunned even us. What is for sure is, the cat is out of the bag and it is unlikely that it can be put back in.

Wednesday and Thursday saw purchases of 13.98 tonnes into the SPDR gold ETF but none into the Gold Trust. The holdings of the SPDR gold ETF are now at 716.011 tonnes and at 174.78 tonnes in the Gold Trust. This is the largest amount of gold bought in two days for over three years. This institution or these institutions are now committed to the gold price rising. We see their actions alone, as driving the gold price up, at one point $58. COMEX short positions were overwhelmed and forced to close with new long positions opened. For a change, stop loss protections above the price were triggered, forcing gold prices even higher.

Meanwhile global equity markets have officially entered a bear market! What a difference between 2015 and 2016 to date. While the causes of the 2016 falls were being put in place in 2010 to 2015, the markets have only really started to factor them in now. What marks another remarkable change in 2016 is the sight of a leading JP Morgan Chief Investment Officer, Robert Michele, saying, “Today’s precious metals flight shows retail investors have more confidence in gold than paper money…..Gold at $1,200 an ounce, what does that tell you? It tells you that in a flight to quality and a safe haven, people have more confidence in gold than in bank deposits or paper money. I think things have gotten out of control.”

With frantic Friday on us now, we expect more action to finish a remarkable week. Brace yourselves!

Many may continue to say that what we are seeing in the gold market is a short-term aberration, but the evidence is that this has been coming for well over a year.

,

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

Gold and Silver Markets: Real and Present Dangers

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Gold Today –The New York gold price closed Tuesday at $1,187.80 down from $1,190.20 down $2.40. Ahead of London’s opening, prices were quoted at $1,185. As London opened the gold price hovered around $1,183. Then the LBMA set it at $1,183.40 down from $1,188.90 down $5.50 with the dollar index almost the same at 96.12 down from 96.04 on Tuesday. The dollar continues weak against the euro at $1.1260 up from $1.1285 against the euro on Tuesday. The gold price in the euro was set at €1,050.98 down from €1,053.20. Ahead of New York’s opening, the gold price was trading at $1,183.65 and in the euro at €1,051.15.  

Silver Today –The silver price in New York closed at $15.23 down 8 cents at Tuesday’s close.  Ahead of New York’s opening, the silver price stood at $15.16.

Price Drivers

Today, we are seeing gold trying to retreat at London’s opening. With gold putting in a sterling performance of late a consolidation period is to be expected as resistance approaches. There are quite a few ‘stale bulls’ above $1,200. Just how fast gold manages to break through overhead resistance will tell us what lies ahead. Softening this view is the reality that the amount of gold at this level, even in the hands of these stale bulls appears limited and China continues to draw in as much as it can.

This morning, with the exception of China, which is closed for the week, equity markets continue to fall with Japan now fully in a ‘bear’ market. The dollar continues to fall against major currencies, particularly the Yen which is now at 114 to the dollar.  All the gains made through weakening their currency are beginning to evaporate. While it doesn’t signal a return to a yen below 100 to the dollar it does signal an end to ongoing competitive devaluations against the dollar. It also signals considerable uncertainty in currency markets looking ahead. We see this in the big tsunami of unwinding by the “carry” trade and sending money from whence it was borrowed.

In the absence of a ‘dollar bull’ market economic fundamentals have to kick in. That’s why financial storms are threatening in 2016. Today’s selling of banking stocks is part of this uncertainty. Can they pay their debts is the question uppermost in market minds. To be fair to the banks, global equities are falling because of a darkening financial future across the world. That’s why the mood is moving towards gold and silver and we are only just at the start!

On Bloomberg today you will not an article reporting that ‘big’ banknotes [€500] are to be banned to prevent crime. While a noble intention, what are the other effects? The biggest is that more transactions will be pushed through the banking system under government’s control. It will reduce the cash market for individuals. With the drug world as successful as ever in moving money around such security actions to date have been ineffective so this restraint on cash has the greatest impact on the public. ‘Big Brother’ is closer! Of course, gold nationally, is open to such controls, but internationally no local controls are ever fully effective. The world is too divided to exert a unified control over gold, but it is vulnerable locally.  

Tuesday saw a sale of 1.487 tonnes from a trader who, in the past buys and sells similar amounts each time. To do so now is to be expected for the gold price has roared up $150 almost without a break, reaching overhead resistance at $1,200.  There were no sales or purchases into or from the Gold Trust. The holdings of the SPDR gold ETF are now at 702.031 tonnes and at 173.78 tonnes in the Gold Trust.

Silver will mark time waiting for gold’s lead.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

Fear and the Fed: Gold and Silver rise, Equities and Jobs fall

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 By Clint Siegner*

Fear TradePrecious metals banked another solid week of gains as investors looked for alternatives to the stock market and U.S. dollar. Both gold and silver pushed through important technical resistance levels. Metals bulls hope to see markets enter a virtuous cycle; improving charts followed by more speculative long interest leading to improved charts.

There is some evidence this may be happening.

TFMetalsReport.com reports the inventory of the largest exchange-traded gold fund (GLD) bottomed in December. It has since rallied sharply as 1) speculators are buying shares in the ETF in volume and 2) GLD “authorized participants” — mostly bullion banks — are covering short positions.

The U.S. equity markets will command most of the focus this week as trading continues to be volatile. The S&P 500 has fallen back to just above key support level in the 1,850 range. If support fails, we’ll have an interesting week.

One wonders if the U.S. can be far behind should economic data continue to disappoint. Former Fed chairman, Ben Bernanke, expects our central bank to add negative rates to the tool kit for fighting recession. And Bloomberg reported that the odds of negative rates, while still relatively small, are rising.

Reasons to Be Cautiously Optimistic on PRECIOUS Metals

Precious metals markets are picking up steam. Last week’s price performance was the best we have seen in months and both gold and silver broke through some important overhead resistance levels. The weekly gains stacked on top of the very strong showing in January. So where do we go from here?

Metals prices are riding higher primarily based on two drivers; fear and the Federal Reserve. Let’s take a look at both for clues about what to expect in the coming months…

It looks increasingly like the world economy is headed for trouble. Fear may be on the rise. Investors are grappling with some pretty lousy economic data, and last week was no exception. The ISM Manufacturing Report showed the fourth straight down month for factories, and the biggest drop in manufacturing activity in more than a year.

Even more problematic, Chinese manufacturing hit a 3-year low point, and the outlook there is grim. The Baltic Dry Index — which tracks costs of ocean freight for commodities such as grains, base metals, and coal — dropped to its lowest level ever last week. Demand for raw goods globally continues to sink.

Jobs CutMain Street America was hit with announcements totaling more than 75,000 planned layoffs in January — 42% more than the same month last year. The retail sector is particularly hard hit. Wal-Mart announced it will close 269 stores globally and 16,000 people will lose their jobs. Macy’s expects to cut nearly 5,000 from its payroll.

But retail certainly isn’t the only sector struggling. Job losses in the oil and gas sector are huge, and Caterpillar recently announced plans to close 4 plants in the U.S. and China.

American consumers are responding to the recent bad news. The key Personal Incomes and Outlays report published a week ago revealed they are battening down the hatches — spending less and saving more.

Wall Street is also feeling the pain. The market for high yield “junk” bonds is deteriorating. Lenders, desperate for better yield in a world dominated by artificially low interest rates, aggressively loaned money into volatile sectors such as oil and gas. Much like the collapse of subprime home lending in 2008, it looks as if those bets may go bad.

In fact, markets are dealing with increasing fears of default everywhere. Risk is jumping significantly for some of the world’s largest banks. The cost to insure the debts of many of these behemoths via credit default swaps spiked massively in recent days.

Virtually all of these institutions are larger than Lehman Brothers. Should even one of them collapse, it will likely be much more difficult to contain the chain reaction that follows.

Fear looks likely to persist and may even accelerate in the coming months. Thus far in 2016, precious metals have been big beneficiaries as investors look for safe havens. That’s an encouraging sign given gold and silver futures missed getting much safe-haven buying the last time the economy slid toward recession in 2008 — at least initially.

With regards to Fed policy, officials there want you to know their decisions are “data dependent.” Lately the S&P 500 seems to be the data they care most about. Just a few weeks ago the consensus was for four additional rate hikes in 2016. Since then the S&P 500 has dumped nearly 10% and the official Fed-speak, as well as the consensus for further hikes, completely reversed.

Our central bankers are now talking about cutting the funds rate back to zero and even the possibility of Negative Interest Rate Policy – NIRP – much like we predicted late last year.

The next FOMC meeting is in March. Odds are we will see officials become even more dovish between now and then. If that occurs we can expect even more weakness in the U.S. dollar and strength in precious metals.

It is important to note that if we get a major shock in the markets — akin to the collapse of Lehman Brothers in 2008 — then all bets are off with regards to metal prices. As happened then, traders may initially be forced to sell precious metals futures along with just about everything else to raise cash and cover margin calls.

This time around, however, metals are at a cyclical low with all speculative money having already been completely flushed out. So far, so good.

Clint Siegner

* Clint Siegner is a Director at Money Metals Exchange, the national precious metals company named 2015 “Dealer of the Year” in the United States by an independent global ratings group. A graduate of Linfield College in Oregon, Siegner puts his experience in business management along with his passion for personal liberty, limited government, and honest money into the development of Money Metals’ brand and reach. This includes writing extensively on the bullion markets and their intersection with policy and world affairs.

Gold – an investment without national boundaries

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Gold This Morning –The New York gold price closed Monday at $1,190.20 up from $1,173.60 up $16.60. Ahead of London’s opening some prices were quoted at $1,186 but as the market started to open, it rapidly climbed back to $1,193. Then the LBMA set it at $1,188.90 up from Monday’s $1,173.80 up $15.10 with the dollar index down slightly at 96.04 down from 96.97 on Monday. The dollar continues weaker against the euro at $1.12885 down from $1.1156 against the euro on Monday. The gold price in the euro was set at €1,053.20 up from €1,052.17. Ahead of New York’s opening, the gold price was trading at $1,193.30 and in the euro at €1,058.64.  

Silver This Morning –The silver price in New York closed at $15.31 up 27 cents at Monday’s close.  Ahead of New York’s opening, the silver price stood at $15.30.

Price Drivers

This morning across the globe, markets are falling around 5% taking nearly all of them close to a ‘bear’ market as defined by a 20% drop from their peaks. Markets are discounting slow growth across the world and a poor growth scene. Investors from the U.S. are pushing into gold now and as we have said for a long time now, once investors turn back to gold they will find it hard to get what they want and cause a rapid rise in gold prices. This is happening as we see now. In a bear market investors run to cash or short dated securities within their nation, but the beauty of gold is that is has no boundaries in the financial world. It is cash and an asset with no national obligations. Right now it is a haven. More surprisingly investors are turning to the Yen and to some extent the euro as they flee the dollar. Both these currency areas are doing their best to force their exchange rates down and not be a ‘safe haven’.

Let’s be clear, this is not a short-term panic from which markets will recover quickly. It denotes real and present dangers in the financial world. Global banks are suffering this morning as debt holdings take a higher risk as global debt burdens are far too high for shrinking economies. The markets are pricing in these higher risks too! Are we facing a debt breakdown in global markets?

If market emotions continue to point to debt crises and full bear markets in equities, gold and silver are going to come into their own.

Monday saw yet another large purchase of 5.056 tonnes into the SPDR gold ETF, making just under 10 tonnes bought this week. One more day of this and we will have recovered all the gold sold from the SPDR gold ETF in 2015.  We also saw another 0.75 of a tonne added to the Gold Trust. The holdings of the SPDR gold ETF are now at 703.518 tonnes and at 173.78 tonnes in the Gold Trust. We are entering “extreme times” in which gold and silver flourish.
Julian D.W. Phillips for the Gold & Silver Forecasters – www.goldforecaster.com and www.silverforecaster.com

Gold price rise U.S Investor Driven as Gold ETFs see more big purchases

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Gold Today –The New York gold price closed Friday at $1,173.60 up from $1,155.70 up $17.90. With China closed this week, it dipped overnight and then quickly recovered after London’s opening and then the LBMA set it at $1,173.80 up from Friday’s $1,158.50 up $15.30 with the dollar index up slightly at 96.97 up from 96.62 on Friday. Late morning it surged up through $1,1 80.  The dollar was weaker against the euro at $1.1156 down from $1.0956 against the euro on Friday. The gold price in the euro was set at €1,052.17 up from €1,034.74. Ahead of New York’s opening, the gold price was trading at $1,175.85 and in the euro at €1,057.09.  

Silver Today –The silver price in New York closed at $15.04 up 18 cents at Friday’s close.  Ahead of New York’s opening, the silver price stood at $14.95.

Price Drivers

The “Year of the Monkey” begins today and China is closed. With that demand postponed for the holiday and returning at its end we expect dealers to try to pull prices back, but currency considerations and physical demand will rule the gold price. While the Chinese Lunar New Year is the highpoint for Chinese gold demand, it does not drop off significantly afterwards as the steady current of growing middle classes continues to attract demand. And this is not just a one-off purchase when they become middle class it signals the start of a continuous purchasing pattern. The plunge of the Shanghai equity market last year and continuing this year has reasserted the attractions of gold. Likewise while the Chinese authorities are trying hard to hold the Yuan up [It’s cost them over $100 billion so far] the currency should slip considerably as it is overvalued.

Friday saw another large purchase of 4.481 tonnes into the SPR gold ETF, making just under 30 tonnes bought in the last week. If the buying continues at this rate we will see the entire amount of gold sold from this fund in 2015 bought back in the first six weeks of this year.  The Gold Trust saw another 1.56 tonnes added. The holdings of the SPDR gold ETF are now at 698.462 tonnes and at 173.03 tonnes in the Gold Trust. We can see no reason why this pace of buying should not continue as the news on the dollar front continues to point to a lower dollar now.

The rise in the gold price is U.S. investor driven as physical demand overwhelms paper sales. This tells us that institutional gold views have been changed by global considerations, despite reports indicating that the U.S. economy looks solid even though growth is weakening. This is a change in perspective as U.S. investors tend to be parochial when it comes to their markets. We find it difficult to see this as a short-term perspective it is a sea-change in their views. For the last 8 years the U.S. has anticipated a strong recovery. Institutional views are, in the majority, for a weakening of the U.S. economy and an even weaker global economy, which will drag down national economies. Currencies will give of the strongest distress signals favoring gold and silver.

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