Julian Phillips’ latest take on the global gold and silver markets and their monetary role.
Mario Draghi, who heads up the ECB, is doing what he says he would by launching QE in Europe. At Eur60 billion a month, until Sept 2016, this could leave room for more to come, if necessary. The euro will fall, much more as we see today.
He did water it down slightly by making national central banks do most of the work and carrying the risk. Only the governments of Europe can take it further. Draghi has now used up his arsenal of tools. Sad to say, we do not see this creating economic growth over time in itself.
The oil price can help, as can the lower euro but with all currencies [except the dollar] ‘racing to the bottom’ how long will this do what it’s intended to? If economic stagnation continues to come closer, more money in shrinking economies will turn against the E.U. Rather like the man who has borrowed too much the loss of credibility will turn QE into an implosion. The strain on the E.U., as a structure, may be too much.
The elections on Sunday in Greece may produce the first fracture in this E.U. structure? If E.U. QE does not produce growth, then we believe we will enter a dangerous period for the world. The tsunami from the financial world will hit the rest of the world’s structures, with governments entering crises not see since the last war in Europe.
More importantly, the stress on the global monetary system itself is now rising, as volatility in exchange rates and capital flows across the system are creating separate pressures. We see gold moving from a ‘safe-haven’ investment to a role where it will be used to reinforce credibility in the world of currencies.
Again, the silver price is keen to hold its gains waiting for gold to hold above $1,300.
On the markets, New York closed yesterday at $1,303.70 up $10.20 as the euro started to really tumble again. In Asia and early London the gold price slipped slightly to $1,296.60 with the euro much weaker at $1.1324 down 2.66 cents against the dollar. The Fix saw the gold price set at $1,293.50 up $6.50 and in the euro, at €1,150.289 up €42.334, while the euro was 3.76cents weaker at $1.1240. Ahead of New York’s opening gold was trading in London uncertainly, at $1,294.00 and in the euro at €1,151.86.
The silver price closed at $18.38 up 23 cents. Ahead of New York’s opening it was trading uncertainly at $18.20.
There were no sales or purchases of gold from or into the SPDR gold ETF but a sale of 0.63 of a tonne from the Gold Trust on Thursday. The holdings of the SPDR gold ETF are at 740.451 and at 166.99 tonnes in the Gold Trust