Gold,silver and the dollar: Be ready for a turbulent future

New York closed yesterday with the gold price at $1,139.90 down from $1,145.60. In Asia yesterday in time gold rose to $1,150 ahead of London’s opening. The gold price was set at $1,151.50 up from $1,143.30 at the LBMA gold setting. The dollar Index was down at 94.82 down from 95.15 and the dollar was trading against the euro at $1.1362 down from $1.1305. In the euro the fixing was €1,013.47 up from €1,011.32.  Ahead of New York’s opening gold was trading at $1,154.00 and in the euro at €1,015.62.  

The silver price closed at $15.70 down 32 cents over yesterday’s close. Ahead of New York’s opening, silver was trading at $15.92.

Price Drivers

With the gold price rising in Asia this morning another attempt is being made to break through overhead resistance. The consolidation pattern looks just about complete, so today and tomorrow may well see a lot of market action. Already it has broken through $1,150.

There were no sales or purchases of gold into or from the SPDR gold ETF or the Gold Trust. This leaves the holdings of the SPDR gold ETF at 687.196 tonnes and 160.62 tonnes in the Gold Trust. This leaves the market in a fairly balanced state today, one which favors a tipping of that balance one way or the other on small volumes.

The dollar is falling below levels not seen for several months.  We are of the opinion that this is what the Fed wants. In the main market analysts are still seeing a bull market in the dollar, looking at the Technical picture in isolation. And that is what we would see if the Technical picture was all important. But the will of the Treasury and Fed, which can control the exchange rate rules, is against dollar strength! So while gold moved up in both the dollar and euro, it was in the dollar that we saw the most gains. It would only take a small fall in the U.S. dollar exchange rate against the euro and gold at its current euro price of $1.145 to lift the $ gold price to $1,162!

With the annual meeting of the I.M.F. in Peru going on, the warnings of the dangers that lie ahead from that august institution are always pointing to the assumption that governments will rectify matters before these warnings become realities. A look at the last seven years of attempts to stave off these consequences tell us it is not realistic to expect government actions to succeed, if they are present at all. Central banks have done all they can do, but they can only do so much. It is government’s turn to act. With the Fed postponing interest rate hikes because of the impact on the dollar and global economy the IMF’s warnings tell us the turmoil of last month in global financial markets may well be the start of a new era on financial disturbance going forward. We believe that world governments are fully aware of what lies ahead, so be ready for a turbulent future.

Silver is steadier today and will now wait for gold to point the way. We feel that direction will be given soon.

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

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