Gold and silver price rise could be meteoric if Fed decision prompts buying

The New York gold price closed at $1,064.10 down from $1,078.20 on Monday.  In Asia prices dropped to $1,062.60 before London took it down to $1,067 as the dollar index weakened to 97.38 against yesterday’s 97.85 on the dollar Index. The euro is at $1.1031 up from Monday’s $1.0955 against the dollar but later fell back to $1.0962. The London a.m. LBMA gold price was set at $1,069.15 up from Monday’s $1,068.00.  In the euro the fixing was €972.44 4.05 up from yesterday’s $9724.05. Ahead of New York’s opening, the gold price was trading at $1,063.05 and in the euro at €966.94.  

The silver price in New York closed at $13.71 down 24 cents. Ahead of New York’s opening the silver price stood at $13.72.

Price Drivers

While gold and silver prices are being forced down the euro is trying to rise strongly. The foreign exchange market clearly has a different view of the Fed’s actions tomorrow than dealers and speculators on COMEX. The price falls appear to be a ‘marking down’ of prices before potential selling can take place. If buying comes in instead the speed with which prices rebound will be meteoric.

We note that there have been no sales or purchases from or to the gold ETFs in the U.S. The holdings of the two gold ETFs, the SPDR gold ETF and the Gold Trust remain at 634.63 tonnes in the SPDR gold ETF and at 156.32 tonnes down from 157.07 tonnes in the Gold Trust.

The Technical picture continues to point downwards but the market is cautious and just about ready for tomorrow’s action. What action? The above picture can change in a heartbeat as it is not based on moves in physical gold. The silver and gold markets are therefore in a high risk situation that could move fast after the Fed’s announcement.

The foreign exchange market is reading a weaker dollar not the stronger one that a rate increase would suggest. With the euro now going stronger this implies a market disappointment in the Fed’s move tomorrow, much as we saw after the announcement from the E.C.B.

We do suggest that tomorrow is no place for those with sensitive nerves. In this type of market, at least in the very short term, the tone is more like a casino. The direction given from the Fed will be clearly seen in the gold and silver markets. It may be hard to get in either way quickly, but each one must consider his risk tolerance and accept making a move after the horses have left the starting gate to lower his or her risks.  We have our own views taking all available information into account and will advise our own to follow that route.

The silver market has become high risk for the next day and more.

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

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