SPFR gold

Chinese middle classes’ faith in gold being restored

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Julian Phillips’  take on the drivers of the gold market ahead of the major US holiday.

New York closed at $1,165.60 down $2.90. Asia and London took it back up to $1,169.50. The dollar was 0.60 of a cent weaker at $1.1054 and the dollar Index was lower at 95.93 down from 96.37.  The LBMA gold price was set this morning at $1,168.25 up $3.95. The euro equivalent was €1,052.67 up €1.67 Ahead of New York’s opening, gold was trading in London at $1,168.60 and in the euro at €1,053.03.

The silver price fell to $15.65 up 6 cent in New York. Ahead of New York’s opening it was trading at $15.67.

Unbelievably the I.M.F. has put its foot in it! The report just issued clarifies that Greece needs to be given 40 yrs to repay its debt and needs lower interest rates and for a portion at least of its debt to be written off if it is to return to growth. Even then it will still have debt to GDP of 150%. For those Greeks who understand this, a No! vote to the past offer from the E.U. seems necessary to get the better deal one like that of the IMF’. So the story still has a long way to go. Nevertheless, the markets may react to the vote if a No! rules the day.

What is of greater importance to the gold and silver price is the behavior of the Chinese equity markets. After the hype that money may be finding its way from gold into the equity markets, that money is leaving the market in droves. The Chinese have always been gamblers and seem to have changed the equity market into a casino. The new rich middle classes are seeing a reinforcement of their faith in gold in a year that may see imports of gold higher than in 2013, their record year. As Chinese middle classes grow continuously, a good portion of their savings [and the Chinese are great savers] finds its way into gold. At some point, that demand will reach a level where it does spill over directly into London and New York and impacts the current low prices.

In India where the monsoons are now generous, there remains two months before their ‘gold seasons’ begin again.

Meanwhile, the gold price is bumping along on the bottom at the mercy of U.S. dealers and speculators. Yesterday the data on employment and on jobs was disappointing so they stepped back, at which point the gold price rose slightly.

On Thursday there were sales of 1.789 tonnes  of gold from the SPDR gold ETF and 0.39 of a tonne from the Gold Trust.  The holdings of the SPDR gold ETF are at 709.65 tonnes and at 167.40 tonnes in the Gold Trust.

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

 

Gold price moves down on Greek same old, same old

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Julian Phillips’ analysis of global gold markets and their driving forces.

New York closed at $1,185.10 down $7.90. Asia held the price at New York’s close and then London took it down $2 at the opening. The dollar was stronger at $1.1261 but looked like weakening in London and the dollar Index was higher at 94.81.  The gold price was set this morning at $1,183.35 down $10.35 compared with a day earlier with the dollar at $1.1224 and the dollar index stood at 95.05, yesterday. The euro equivalent was €1,054.54 up €3.19. Ahead of New York’s opening, gold was trading in London at $1,183.60 and in the euro at €1,054.90.

The silver price rose to $16.20 up 10 cents in New York. Ahead of New York’s opening it was trading at $16.00.

With the news that the Greek government had put forward a new set of proposals that covered pensions and taxation it appeared that the government was capitulating. However, details of these proposals were not made public. Listening to the IMF & E.U. reactions it seemed that they felt that real negotiations had only now started, but much more need to be done. Meanwhile, on the surface it appeared that more austerity had been accepted by Tsipras and his government, a step he said he would not take. Even with these new proposals he risks losing his support at home. Has he stepped into no-man’s land? This week sees the negotiations taken to the final level, but it remains to be seen if an agreement is really possible. We continue to watch and wait without any assumptions. Are we at the climactic scene of the tragedy? We can’t see the fat lady yet!  In fact we see these proposals as the best that Tsiprias dare offer and yet the E.U. wants more. This leaves the two still far apart.

But global financial markets are reacting to these steps, becoming more like ‘bookies’ shops, betting on the hoped-for outcome, not on the current realities. Even the gold market is gyrating both ways, driven by speculative interest, not physical buying and selling. $20 up last week, $20 down yesterday but no break in pattern is yet seen. The market remains thin in London and New York [in particular] with volumes down to 40% this week over last week’s levels. Consequently, no direction is being clearly given, so far to gold and silver or any other markets currently. We will have to watch the as yet unwritten scenes of the tragedy unfold during the next days of this week.

Should the Greek story be given so much importance by financial markets? We believe not, unless Greece does exit the euro, when the ramifications will affect the monetary world and make the euro stronger. If it is simply going to be more of the same old, same old, as Greece continues as an impoverished nation for the next generation then no, it should not affect gold or silver prices.

Gold investors in the SPDR disagreed with market movements yesterday and bought 3.578 tonnes of gold into the SPDR gold ETF with no change in the Gold Trust on Monday. The holdings of the SPDR gold ETF are at 705.475 tonnes and at 167.79 tonnes in the Gold Trust.

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