Are gold and silver breaking down?

Gold Today –Gold closed in New York at $1,217.20 down from $1,220.10 on Thursday. On Tuesday morning in Asia, ahead of London’s opening it was lifted back to $1,219.45 up $3.00. London pulled it back to see the LBMA price setting at $1,216.45 the same as Thursday of last week.

The dollar index rose today to 95.84 after Thursday’s 95.61. More institutions are now accepting that the dollar’s bull run is over. The dollar is weaker against the euro at $1.1213.

The gold price in the euro was set at €1,084.86 up from €1,116.88 on Thursday.

Ahead of New York’s opening, the gold price  had moved up fairly sharply and was trading at $1,226.75 and in the euro at €1,094.04.

Silver Today –The silver price closed in New York at $15.17 down 8 cents on Thursday. Ahead of New York’s opening the silver price stood at $15.27.

Price Drivers

While the precipitous fall in gold and silver was harsh, we see the gold and silver prices having limited downsides.

The Technical picture has registered serious changes, but we question whether a couple of days selling on tiny volumes is sufficient to change the trend.  This points to a volatile market ahead, with the upside favored. Having said that, we need to see U.S. investors into gold ETFs return with buying orders in large amounts, as we have seen in the last few weeks.

After a holiday weekend we expect to see activity pick up today and may well bring a few surprises.

Initial reports blamed the report that Venezuela had been selling its gold reserves aggressively over the last few months on the fall in the gold price. But at around 12.5 tonnes a month these amounts have already been absorbed with the gold price rising higher at the same time. Such sales are not hurting the gold price.

But the U.S. media attributes it to talk of a potential Fed hike. When we look at the data coming out of the U.S. we see it as mixed and certainly not sufficient to warrant a Fed hike.

What we saw last week was prices falling in Asia and the falls continuing in New York, with sales on COMEX but little, if any, physical sales. This implies that should the gold ETF buyers re-emerge, we will see prices rebound strongly.

Gold ETFs There were purchases of 2.081 tonnes into the SPDR gold ETF 0.3 of a tonne into the Gold Trust last Thursday.  The holdings of the SPDR gold ETF are now at 823.742 tonnes and at 193.02 in the Gold Trust. But COMEX and dealers held sway with little to no physical sales in sight and marked prices down, last week. Will this change after April 19th?

Silver – The silver price was hammered heavily last week’s end dropping from a peak of $15.96 to $15.11 a fall of over 5% while its fundamentals continue to improve and investment buyers come into the market. We continue to believe silver is priced as a monetary metal, not on its fundamentals.

Julian D.W. Phillips | | StockBridge Management Alliance

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