Gold looks ready for strong move higher

Gold TodayGold closed in New York at $1,225.00 up from $1,207.50 on Tuesday. In Asia, it rose to $1,226 ahead of London’s opening. It steady in London then jumped at the LBMA price setting where it was set at $1,232.25 up from $1,218.75 yesterday. The dollar index is slightly stronger at 97.77 up from 97.42 on Tuesday.

The dollar is stronger against the euro again at $1.0978 up from $1.1003 on Tuesday. The gold price in the euro was set at €1,122.47 up from €1,106.97.

Ahead of New York’s opening, the gold price was trading at $1,235.45 and in the euro at €1,125.85 but then powered upwards through the $1,250 mark in morning trading in New York.  

Silver Today –The silver price closed in New York at $15.26 up 10 cents.  Ahead of New York’s opening the silver price stood at $15.33 moving up above the $15.50 level when the New York market got under way.

Price Drivers

Tuesday saw no purchases or sales from the SPDR gold ETF 0r the Gold Trust. The holdings of the SPDR gold ETF are thus still at 752.294 tonnes and at 187.50 tonnes in the Gold Trust.

In the SPDR [GLD] gold ETF we suspect that the institution which bought 18 tonnes of gold at $1,050 is the same one that bought 45.663 tonnes at the beginning of this week. The very nature of the purchases implies not just that the institution is huge but should continue to buy at opportune times and prices. The purchases are so large that it undoubtedly is frightening off any institution that was contemplating that both it and its clients should ‘short’ the gold market.

The gold price made a surge at the LBMA price setting and appears to have started a strong move upwards. If this continues we could see it go much higher. The Technical picture has moved to the critical point where one expected a strong move, either way! Because the surge was at the LBMA price setting, where we expect the largest volumes of the day to be traded, it does appear that a strong move higher is underway.

When we look at oil, we don’t just see falling prices [which we feel will continue to fall once storage capacity is used up] we see falling government revenue too. This places more strain on sovereign debt servicing.

So when the Saudi Oil Minister states that high cost producers must cut costs or go out of business it is emphasizing its objective that was set when it refused to cut production when U.S. production surged as ‘fracking’ production came to the market. We think the objective from the start was to put shale producers in the U.S. out of business. The entire exercise, long-term, is good for gold because of the increased levels of uncertainty across the world. Add this to the fall in global growth and shift in wealth to the east and we see fertile ground for higher gold prices.

Silver – The silver price is starting to run with gold. Today will be a high risk day but positive in the silver market.

Julian D.W. Phillips | | StockBridge Management Alliance

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