U.S. GDP

Will lower growth weaken the dollar (and boost gold)?

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The New York gold price closed Thursday at $1,114.50 down from $1.125.80 down $11.30. In Asia on Thursday, it lifted it to $1,115.55 ahead of London’s opening and then the LBMA set it at $1,112.90 down from $1,119.00 with the dollar index up at 99.08 up from 98.85 Thursday. The euro was up at $1.0918 up slightly from $1.0910 against the dollar. The gold price in the euro was set at €1,019.33 down from €1,025.66. Ahead of New York’s opening, the gold price was trading at $1,115.90 and in the euro at €1,022.07.  

The silver price in New York closed at $14.24 down 24 cents at Thursday’s close.  Ahead of New York’s opening, the silver price stood at $14.25.

Price Drivers

Wednesday saw no purchases or sales to or from the SPDR gold ETF but a purchase of 1.40 tonnes into the Gold Trust. The holdings of the SPDR gold ETF are now at 669.229 tonnes and at 166.45 tonnes in the Gold Trust. We expect the gold price try to climb in consolidation mode, today.

Today sees a slew of data from the U.S. GDP to the E.U. inflation rate. For gold and silver investors the importance of these lies in their impact on the exchange rates of the dollar and the euro. We constantly get bombarded with new statistics trying to give us the impression that all is well in the developed world but certain realities come through.

Today, so far we have seen Japan desperately attempting to engineer inflation to 2% using negative interest rates to do so. We see this type of inflation damaging the credibility of the Yen, already no longer a ‘safe haven’ because of the treatment it has received to date. The euro likewise is under attack with hints at more stimuli on the way.

It seems unfashionable to say this but central banks can only influence monetary policy and not engineer growth. This is the job of government using fiscal resources and structural reform as well as doing what they can to assist the consumer on the ground with improvements to his job security, value of his house and putting some disposable income in his pocket. At the moment it is only Saudi Arabia that is doing that for consumers all over the world.

But with U.S. economic growth declining in 2015 today may see economic growth drop to below 1% from nearly 4% at the start of last year. What happened to the recovery and the efforts  to boost it since 2008?

Will lower growth weaken the dollar? With the other globally leading currencies trying their best to fall, against what will the dollar fall? If so, this is gold positive.

Silver– Silver should find a solid base today.

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

Gold awaits data-driven Fed’s next move

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Julian Phillips’ latest analysis of the gold and silver markets and their key drivers.

The key news of yesterday was the drop in U.S. GDP growth to 0.2% in the first quarter. More importantly the data coming out of the U.S. is for a continued slowdown with it possibly worsening. With no weather constraints now, the current quarter is crucial to what the Fed will do in the future. It has made it clear in the past that its actions are data driven so speculation as to whether a rate rise will happen in June, September or even later, appears pointless as future data will make that decision.

If the U.S. is slowing you can be sure the Eurozone is too, with the prospect of a recession there starting again. It is possible that, as different economic flows converge, we could see a very different global scene in the second half of the year to the one we are seeing now. How will that affect gold? One of the main flows that will directly affect gold this year is the continued path to a truly global gold market alongside the move of the Yuan to center stage in the global monetary system, while economic weakness returns. We see this to the detriment of the dollar. We know that the U.S. could use a much weaker dollar now, but China too, would like to see a steady to weak Yuan going forward. In this climate the environment for gold is distinctly positive.

Just remember that we have had 7 years of quantitative easing in the U.S. and now see it at massive levels in Japan and the Eurozone. If growth falters, questions about the abilities of governments to control growth jump up! That is gold positive!

Markets

New York gold closed at $1,204.00 down $8.20 on Wednesday. Asia saw it hold there and London took it up a dollar. The LBMA Gold price was set at $1,204.30 down only 50 cents. The euro equivalent stood at €1,076.13 down almost €20 while the dollar was weaker at $1.1192 down from $1.0993 against the euro. Ahead of New York’s opening, gold was trading in London at $1,203.40 and in the euro at €1,075.81.

The silver price closed at $16.53 down 8 cents on Wednesday. Ahead of New York’s opening it was trading at $16.57.

The dollar index fell, again, this morning  to 94.61 from 95.89 yesterday with the dollar continuing to lurch lower against the Euro from $1.1008 to $1.1212 today.   The fall of gold in the Euro is extraordinary and may spur arbitrageurs to lift the gold price in the Euro soon.  The question this poses is, “Is gold priced in the dollar or the euro?”  So now a weak dollar means a weak gold price?

There were no sales or purchases of gold from the SPDR gold E.T.F. or from or into the Gold Trust on Wednesday. The holdings of the SPDR gold ETF are at 739.065 tonnes and at 165.58 tonnes in the Gold Trust.

 

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