Yesterday’s action in the gold and silver markets

By Julian Phillips

Yesterday saw New York dominate the gold price, again in thin holiday trading, as we wait for the New Year to come in. The price was pulled down quickly to $1,180 as traders acted on the Technicals. There were barely any sales or purchases from or to the gold ETFs. The holdings of the SPDR gold ETF are at 712.302 and at 161.73 tonnes in the Gold Trust.

The euro has resumed its fall and is now tackling the lower $1.21 area and looking weak. With 10-yr Treasuries offering 2.2% and leading nations in the Eurozone offering substantially less than 1%, yield seeking money is flowing stateside. The U.S. balance of payments is looking good supporting a stronger dollar. The only factor against a stronger dollar is that the Treasury does not want to see it. Can the U.S. resist pressure from outside?

We also expect the Chinese monetary authorities to weaken the Yuan if the dollar strengthens more. At 6.22 Yuan to the dollar it is off its high by 2%. They too do not want a stronger Yuan!

As we end 2014 the U.S. market mood is that equities will go higher, bonds will remain on low yields and gold is out of their picture. Outside of the U.S. where the vast bulk of gold demand exists, gold is in persistent strong demand, the U.S. influence over the gold price is at a long-term low level and expectations of huge volatility in all global financial markets are widespread.

We expect the current U.S. financial euphoria will not last as long as they think and gold will do far better than most think too!

The silver price remains very volatile while following the gold price’s direction all the way.  For the silver price to lessen its volatility, it needs to see the gold price give a clear direction. We see this happening somewhere north of $1,200 an ounce. At that point, we expect to see more professional investors come in and less two-way trading in silver.

Julian Phillips is the founder and editor of goldforecaster.com and silverforecaster.com