Gold may have found a foundation above $1,200.  

Gold TodayGold closed in New York at $1,208.20 up from Tuesday’s $1,199.60. In Asia, it held close to that level, but pulled back to $1,204 in London to be set at over $1,212 this morning but then slipped back to $1,204 before London opened. Then the LBMA set it at $1,204.40 up from $1,202.00 up $2.40, with the dollar index stronger at 96.85 up from Monday’s 96.54.

The dollar is slightly stronger again, against the euro at $1.1116 up from $1.1144 on Wednesday. The gold price in the euro was set at €1,083.48 up from €1,078.51.

Ahead of New York’s opening, the gold price was trading at $1,207.15 and in the euro at €1,087.82.  

Silver Today –The silver price stood in Asia at $15.27 up 5 cents at the close in New York.  Ahead of New York’s opening the silver price stood at $15.32.

Price Drivers

Wednesday saw no purchases into the SPDR gold ETF but a purchase of 0.80 of a tonne into the Gold Trust, still waiting for gold to build a bottom. The holdings of the SPDR gold ETF are now at 710.954 tonnes and at 180.39 tonnes in the Gold Trust. Investors into these ETFs are certainly not sellers right now.

The gold price is holding over $1,200 settling and building a bottom there. This is reassuring bulls and worrying bears. We take note of the fact that U.S. investors have turned bullish on the physical side and we take further note that U.S. investors are not in a position to drive the gold price down with large physical sales. The ongoing weighty exports from London to Switzerland and to the Far East add to the draining of liquidity from the gold market in favor of Asia. Likewise, China’s demand at 215 tonnes of gold in December 2015 confirms just how great that demand is!

In India, current demand when extrapolated points to 1,000 tonnes being ‘officially’ imported ignoring a vast amount over and above that through smuggling into the country to gain the 10% of unpaid duties.

When totaled for 2016 we see a picture of ongoing demand into Asia taking all of the newly mined gold supplies off the market. Against this, how can sellers dominate the prices of gold and silver?

The Fed and Japan

The news out of the Fed Minutes and out of Japan gives some clarity on the way forward for the gold and silver prices. The Fed’s worry and uncertainty on the way forward for the U.S. economy, due to influences outside the U.S. is new to the usually introverted and myopic investor opinions. While such a viewpoint is new, it is likely to be a feature of Fed and Treasury actions going forward. U.S. investors are used to the nation leading the world on the economic and monetary fronts. For investors to recognize that the U.S. is very much a part of the global economy and influenced by it is a difficult departure for them.  To us it is a forerunner to major structural changes in the monetary world.

As to Japan’s disappointing export performance [falling 14%] just reported, this confirms that it will take far more than monetary stimuli and exchange rate weakening action to bring about an economic revival in Japan. With the dislike of Japan by China, the current driver of global growth, these numbers are indicative of a much longer term picture.

Silver – The silver price continues to hold strongly above $15.00 and we expect will do so while gold is in this Technical pattern.


Julian D.W. Phillips | | StockBridge Management Alliance

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