Yellen sticks to the gold script

Gold TodayGold closed in New York at $1,241.30 up $23.10 from $1,217.20 Tuesday. On Tuesday morning in Asia, it held that level. London pulled it back to see the LBMA price setting at $1,238.30 although still well up on the previous day’s $1,216.45.

The dollar index held at 95.84 today the same as Tuesday. The dollar is weaker against the euro at $1,1330 after yesterday’s $1.1213.

The gold price in the euro was set at €1,092.94 up from €1,084.86 on Tuesday.

Ahead of New York’s opening, the gold price was trading at $1,234.75 and in the euro at €1,090.00.  

Silver Today –The silver price closed in New York at $15.33 up 16 cents on Tuesday. Ahead of New York’s opening the silver price stood at $15.35.

Price Drivers

The Technical picture remains negative but, as we said yesterday, this could change quickly because of the two-day nature of the fall from the uptrend. We continue to expect a volatile market. Having said that, we continue to expect to see U.S. investors buying the shares of the gold ETFs.

Janet Yellen’s comments were as we expected, with her reiterating Fed fears emanating from the global economy, particularly oil and China. The Fed remains data led and will ‘proceed cautiously’. Observers keep pushing, as always, for a hike in interest rates and keep being disappointed, despite the Fed making it clear that they are following the data not leading it.

For gold investors, the relevance of her comments lies in the dollar’s exchange rate. This continues to weaken with the dollar falling to more than $1.13 against the euro and to 94.96 on the dollar index. This is yet another expression that the U.S. Monetary Authorities do not want a strong dollar.

Gold ETFs For the first time in a long time we saw sales of 3.271 tonnes of gold from the SPDR gold ETF and a remarkable 7.14 tonnes from the gold Trust, yesterday. This leaves their holdings at 820.471 and 185.88 tonnes in the SPDR & Gold Trust respectively. These tonnages were more than enough to push prices down, but they didn’t. Instead the comments by Janet Yellen saw gold prices rise. Such is the power of COMEX over physical features of the gold market.

We suspect the sales were made before Janet Yellen spoke. We expect some tonnage to be re-bought soon, in the light of what she said.

Silver – The silver price began its recovery yesterday and saw 46 tonnes of silver bought into the Silver Trust. It must be noted that investors into the Silver Trust rarely influence the price as the silver price is priced as a monetary metal alongside gold.

These investments were very different from the gold ETFs, but we suspect that we will see more additions to both the Gold ETFs and the Silver Trust.

Julian D.W. Phillips | | StockBridge Management Alliance

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