Gold price in a high risk area

New York closed at $1,117.70 down $16.60 on Tuesday. In Asia it rose to $1,120.00 before London opened. The LBMA price setting fixed it at $1,118.00 down from $1,130.90 yesterday. The dollar Index was stronger yesterday and rose to 97.36 at the close of New York up from 96.86 yesterday. The dollar was slightly stronger at $1.0931 up from $1.1017 up against the euro.  In the euro the fixing was €1,023.25 down from €1,029.789.  At New York’s opening gold was trading in the euro at €1,023.19 and at $1,118.30.  

The silver price closed at $15.29 down 14 cents over Tuesday’s close. At New York’s opening, silver was trading at $15.27.

Price Drivers

Technically, the gold price has broken down through support and yet in Asia it lifted again. The Technicals are not yet clear enough to point a way forward for the gold price. We are in a high risk area now. It could either rally strongly or plunge.

Tuesday saw sales from the SPDR gold ETF of 2.978 tonnes making over 10 tonnes sold this week and a further 0.70 of a tonne sold from the Gold Trust leaving their holdings at 686.304 tonnes and at 160.30 in the gold Trust.

These sales were not sufficient to cause such a large fall in the gold price so we must ask why such a fall? We know that exporters of gold to China do not chase prices but accept gold that is offered to them. This means they have little impact on prices allowing prices to fall increasing supply. This increases the influence of speculators and dealers on COMEX on the gold price, which is solely reflective of U.S. opinion on gold prices with little physical gold movement. The result is a distorted market causing prices to behave as they are now. It is not in the interests of Asian buyers to change this scene as they are maximizing physical supply at bargain prices.  

Today the I.M.F. discusses the inclusion of the Chinese Yuan in the currencies that make up the Special Drawing Right. It is a day on which China has placed great importance. Since discussions began, China has complied with the wishes of the U.S. controlled I.M.F. in publishing gold reserves on a monthly basis and keeping the Yuan exchange rate steady against the dollar. This would change if the IMF rejected the Yuan in that role. We expect that a Yuan Gold Fixing will follow soon thereafter, on the Shanghai Gold Exchange.

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

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