Gold still in consolidation range

New York closed with the gold price at $1,107.40, down $15. This morning gold was trading at $1,107.00 still. In the euro this was 989.59 down €14.61.  This morning the dollar index started the day at 96.09 up from 95.87 yesterday. The LBMA gold price was set at $1,007.75 down $14.55 from yesterday. The euro equivalent was €900.66 down €14.54. Ahead of New York’s opening gold was trading at $1,107.30 and in the euro at €989.72.  

The silver price was down slightly but firmer than gold at the close in New York at $14.75 down 5 cents. Ahead of New York’s opening silver was trading at $14.73.

The gold price made the strong move we forecast yesterday to the downside. But it still remains in the consolidation range of trading pattern of the gold price between $1,100 and $1,140. With the indicators pointing to the vulnerability to a strong move yesterday we saw a sale of 4.171 tonnes from the SPDR gold ETF seemingly used to press gold prices lower in a balanced market. There was a sale of 0.42 of a tonne from the Gold Trust, on Tuesday. This leaves the holdings of the SPDR gold ETF at 678.183 tonnes and 160.35 tonnes in the Gold Trust.

This sale was large enough to turn the gold price down to where it is almost at support. We expect the consolidation pattern to continue in the days to come leading up to the next statement from the FOMC on the 19th September.

It is time to regain perspective on the global economy and global monetary system when assessing gold. The global economy is weak with the exception of the U.S. where the recovery is moderate. Can the U.S. resist the expected turmoil and further downturn in the global economy in its economy and financial markets? This is the big question.

As to China, now that it has largely completed this phase of its infrastructural development, the impact on commodity prices is very negative. Unless China resumes the pace of development it has had, we are unlikely to see such peaking prices in the future in commodities. But its economy will continue to grow at a 6 – 7% rate on its $10 trillion economy. Bear in mind that when it was a $1 trillion economy a 10% growth rate was $100 billion. On $10 trillion, 6% growth is $600 billion. But this growth will come from the gold loving 33% [eventually] middle classes of the Chinese population [exceeding the total population of the U.S.]

Meanwhile the Shanghai Gold Exchange has permitted the use of gold as collateral on futures contracts to 80% of its value.

Again, silver was much stronger than gold yesterday and is likely to be so today too.

Julian D.W. Phillips for the Gold & Silver Forecasters – and

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