Julian Phillips’ latest market commentary for gold and silver
New York closed on Tuesday at $1,292.70 up $1.00 as the euro started to weaken again. In Asia and early London the gold price moved up to $1,300 with the euro at $1.1561. The Fix saw the gold price set at $1,298.00 up $5.75 and in the euro, at €1,121.673 up €8.048, while the euro was at $1.1572. Ahead of New York’s opening gold was trading in London at $1,298.40 and in the euro at €1,122.21.
The silver price closed at $17.93, 19cents higher. Ahead of New York’s opening it was trading at $18.16.
There were purchases of 11.351 tonnes of gold into the SPDR gold ETF and a purchase of 1.8 tonnes into the Gold Trust on Tuesday. The holdings of the SPDR gold ETF are at 742.243 and at 165.42 tonnes in the Gold Trust. These were, once more, substantial purchases, showing a changed attitude among U.S. investors to gold.
Once again Asian physical demand came through overnight pushing the gold price to $1,300 ahead of London’s opening. With Asian demand sucking just about all available newly mined gold in, there is little room for new demand except at higher prices.
We thus attribute the price rise to Asian demand not developed world demand. This is what we are seeing now, so while U.S. and European demand is growing, so is Asian demand. The laws of supply and demand are imposing their will now.
As we said yesterday, “With a new ‘big figure’ [$1,300] now firmly in the sights of the gold price, we would expect the gold price to consolidate before rising further. That is, unless there remain substantial short positions that need covering at that level, in which case the covering of these may cause a further price spurt.” We are seeing this play out now.
€500 billion worth of bond buying is what the most qualified believe will be unveiled tomorrow by the E.C.B.. They also say that this is not enough to achieve the objective of stimulating the Eurozone economy. We agree and point to the very low levels of confidence in that area.
Expectations of deflation are high, so whatever the E.C.B. does it has to turn that around. Without the support of Germany, this seems unlikely. The Eurozone will stay in the spotlight through 2015 and the euro will fall alongside declining confidence, despite Draghi’s best efforts. The only questions investors need an answer to is, “How much and how fast will the euro continue to decline?”
The silver price is starting to catch up and will do so as gold convinces investors it can hold above $1,300.