Gold ETFs continue building; Silver decouples downwards

Gold TodayGold closed in New York at $1,222.80 down from $1,233.00. In Asia on Monday, it rose to $1,231.25 ahead of London’s opening. It then rose further to be set by the LBMA at $1,234.15 up from $1,231.00.  Since Friday’s setting, gold fell to $1,212 but not on physical selling. The dollar index is stronger at 98.25 up from 97.39 on Friday.

The dollar is up against the euro at $1.0895 up from $1.10248 on Friday. The gold price in the euro was set at €1,132.77 up from €1,116.65.

Ahead of New York’s opening, the gold price was trading at $1,232.00 and in the euro at €1,131.05.  

Silver Today –The silver price closed in New York at $14.65 down 48 cents.  Ahead of New York’s opening the silver price stood at $14.80.

Price Drivers

The result of the G-20 meetings, as usual, were disappointing. There was no real consensus on government support for solid growth and a warning was given by Mark Carney of the Bank of England that monetary policy was not sufficient to stimulate growth and that negative interest rates directly weaken exchange rates, eventually to no avail. The E.U. and Japan were the targets of this statement.

More importantly it is clear that if such policies were not halted it will be ‘every man for himself’ in a currency ‘war’! The euro went much weaker this morning as perhaps more negative interest rates were on the way. The Yen remains strong, still attracting capital.

Gold ETFs On Friday there were purchases of 2.82 tonnes into the SPDR gold ETF and purchases of 0.27 of a tonne into the Gold Trust. The holdings of the SPDR gold ETF are now at 762.405 tonnes and at 188.52 tonnes in the Gold Trust.   While Friday saw smaller but continuous purchases they were not heavy enough to have a forceful effect on the gold price. Please note that the price remains in the hands of U.S. investors.

Indian demand remains on the sidelines until the Indian budget details are out, today. Demand was held back hoping for a cut in duties in the last week. If duties are cut then the demand will jump as buyers see up to a 10% cheaper price there. That brings prices down from [see below] nearly Rs.85,000 an ounce to Rs.76,500. That will draw out new Indian demand. It will also make it much more attractive for Indian investors as the ‘spread’ on prices will narrow significantly, making both trading and investment more attractive.

It is feasible that the Indian government will drop duties, because the Trade Balance of Payments has improved significantly because of the plunge in oil prices, giving space for a popular decision such as the lowering of duties on gold.

Silver – For the first time in years the silver price broke away from the gold price and fell heavily. Yes, the gold price did fall and attempted to threaten the Technical picture for gold, but has started the week higher in a much better Technical picture. So we have to watch to see if silver will bounce back, like gold or has it really broken away. How it performs today will guide us on this. So today is a day for gamblers while professionals gauge the picture carefully.  


Julian D.W. Phillips | | StockBridge Management Alliance

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