Julian Phillips’ latest commentary on yesterday’s gold and silver market action and where they may go from here.
By Julian Phillips
New York closed at $1,182.60 on the last day of 2014 and the first trading day of 2015 saw the gold price stand at $1187.40 ahead of London’s opening. The Fix saw the gold price set at $1,184.25 down $15.00 and in the euro, at €983.351 down €3.991 while the euro was 1.23 cents weaker at $1.2043. Ahead of New York’s opening gold was trading in London at $1,183.10 and in the euro at €981.87.
The silver price was at $15.69 down 58 cents. Ahead of New York’s opening it was trading at $15.79.
There were sales of 1.792 tonnes from the SPDR gold ETF and sales of 0.55 of a tonne from the Gold Trust before the year’s end. In thin holiday trade, alongside the falling euro, traders knocked the gold price back to the $1,180 area as the euro began today a cent lower at $1.2051. While the holiday continues until next week, we expect the euro’s fall to dominate the gold prices, until real volumes return to the gold market. The holdings of the SPDR gold ETF are at 709.16 and at 161.18 tonnes in the Gold Trust.
We expect 2015 to be a year where currency dramas keep popping up as the dollar rises and the rest of the world’s currencies fall. The oil price collapse is benefitting all nations as well as the U.S. dollar as oil import costs fall to around half of last year’s levels. In most countries these costs make up a big proportion of imports. But because all non-oil producing countries are benefitting it is a common denominator so cancelling out the impact on most exchange rates. Attention therefore reverts back to interest rates, with the U.S. offering higher rates than the Eurozone, placing continual downward pressure on the euro and upward pressure on the dollar. This will continue to be the case throughout 2015.
In addition we do expect the Chinese Yuan ‘peg’ to the dollar to be lowered as the dollar rises. After all, China exports globally, not just to the U.S. More importantly we cannot see a case for the Yuan to see a higher exchange rate in the eyes of that government, no matter what other countries say.
The volatility we expect to see in exchange rates will create an unstable international monetary environment favoring gold going forward. Please bear in mind that the current monetary system is not the result of design but consequences. We do not believe it has the capacity to withstand the heavy pressures that lie ahead in 2015/16.
Silver– While the silver price is and will following gold it has become considerably more volatile as U.S. traders see more profit opportunities in silver than gold. This will continue until gold holds above $1,210, we feel.