Gold pawing the ground as ETFs continue to build

Gold TodayGold closed in New York at $1,236.80 up from Thursday’s $1,208.20. In Asia, it started to slip back and kept slipping in London’s morning until the LBMA set it at $1,221.50 up from $1,204.40 up $17.10 at yesterday’s setting. The dollar index is barely changed at 96.88 after yesterday’s level of 96.85.

The dollar is slightly stronger again, against the euro at $1.1102 up from $1.1116 on Thursday. The gold price in the euro was set at €1,100.25 up from €1,083.48.

Ahead of New York’s opening, the gold price rose to $1,231.70 and in the euro at €1,108.24.  

Silver Today –The silver price stood in Asia at $15.49 up 22 cents at the close in New York.  Ahead of New York’s opening the silver price stood at $15.46.

Price Drivers

Thursday saw purchases of 2.677 tonnes into the SPDR gold ETF and a purchase of 1.11 tonnes into the Gold Trust. Physical gold purchases are returning into these two, U.S.-based gold ETFs as gold now consolidates in a pattern promising a strong move shortly. The holdings of the SPDR gold ETF are now at 713.631 tonnes and at 181.50 tonnes in the Gold Trust.

With U.S. investors now firmly on the buy side, gold is ‘pawing the ground’ ready for a strong move. We believe this move will catch most market professionals off-guard and delineate where gold and by extension, silver prices are headed now.

Volatility comes most strongly when liquidity levels are low. The 3%+ moves of the gold price both ways in the gold market on COMEX, in the last few days in particular, are clear indications of this. To us this is also a sign that New York’s pricing power is falling. London, where liquidity is higher sees prices move in smaller ranges and it continues to pull prices back or up because of this. But with the large amounts leaving London for Switzerland [for refining into metric measurements] and directly to Asia liquidity is slowly but surely being reduced there too.

Most commentators are ignoring the developments coming in the Chinese gold market that are to start in April. These are structurally important to the gold price.

Silver – The silver price is robust with American investors confident silver will not fall soon.


Julian D.W. Phillips | | StockBridge Management Alliance

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