Waiting on the IMF’s SDR vote

The New York gold price closed at $1,058.60 on Friday.  In Asia prices were pulled back to $1,056 as the dollar went stronger again this morning, taking the dollar to 100.23 up from 100.08 on the dollar index. The LBMA price setting fixed it at $1,055.65 down from $1,064.65 on Friday’s LBMA price setting. The dollar is at $1.0580 up from $1.0590 against the euro.  In the euro the fixing was €998.44 down from Friday’s €1,005.43.  Ahead of New York’s opening the gold price was trading at $1,056.15 and in the euro at €999.01.  Later it moved up to the low $1,060s

The silver price in New York closed at $14.10 on Friday. Ahead of New York’s opening the silver price stood at $14.12.

Price Drivers

The Technical picture on the gold price continues to point lower. We would have thought the fall would have been faster, but it seems that the lack of physical sales is now affecting the pace of the fall. The fundamentals have become irrelevant for 50% of gold mines are now unprofitable with the industry looking at a five year life for its mines, at the pace that gold is being produced now.

But gold is moving with currencies as money, rising in falling currencies and falling in the dollar. After a sales of 0.893 of a tonne from the SPDR gold ETF but none from the Gold Trust, the holdings of the two gold ETFs, the SPDR gold ETF and the Gold Trust remain at 654.799 tonnes in the SPDR gold ETF and at 159.52 in the Gold Trust.

The big news of the day will be the vote by the I.M.F. as to whether the Yuan will join the basket of currencies that make up the SDR. While it is a symbolic move, it will trigger an adjustment in central bank foreign exchange holdings with the Yuan coming in against while that amount of dollars and euros being removed. Its acceptance as a ‘well used’ currency by the IMF will make it far more acceptable for international deals to be funded in Yuan, again at the expense of the dollar and the euro.

But most importantly is signifies a change in the monetary system’s structure. While the other currencies are ‘allies’ of each other China is not seen as an ally, thereby opening the likelihood of a divided and multi-currency system. With the U.S.A. holding the controlling vote in the I.M.F. we will wait to see if they accept the situation. It appears they can hardly refuse to do that, but let’s see first.

Julian D.W. Phillips for the Gold & Silver Forecasters – www.goldforecaster.com and www.silverforecaster.com


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