Gold battling for direction but upside offers few risks

Gold TodayGold closed in New York at $1,223.20 down from $1,232.30 on Friday. On Monday morning in Asia, it slipped to $1,216. In London, the LBMA morning price setting came in at at $1,215.00 down from $1,232.10 Friday.

The dollar index held at almost the same level at 94.59 up from 94.52 yesterday. The dollar is stronger against the euro at $1.1386 up from $1.1412 Friday.

The gold price in the euro was set at €1,067.19 down from €1,079.65 on Friday.

Ahead of New York’s opening, the gold price was trading at $1,220.00 and in the euro at €1,071.59.  

Silver Today –The silver price closed in New York at $15.05 down 30 cents on Friday. Ahead of New York’s opening the silver price stood at $14.99.

Price Drivers

Dollar weakness to continue We have highlighted the Fed’s dislike of a stronger dollar, confirmed by Mrs. Yellen’s speech. But to this we add the steady excretion of dollars from China as it diversifies out of the dollar into a broader currency based portfolio.

In our newsletters we have highlighted the coming multi-currency monetary system replacing dollar hegemony for several years now. This is underway now.  It does mean that the dollar has seen its peak against other currencies.

In addition, long-term protectionism is appearing on the distant horizon as nations seek to protect their economies. For instance we see the U.K. taking action to ensure a continuation of the Port Talbot, Tata steel plant and preventing the dumping of cheap steel from China. Such protection will, in the future come into play in the developed world on a broad front.

This is of great benefit to the gold price because such moves away from globalization demands a common acceptable, non-national dependent money, such as gold, to back up international dealings.

With gold having had its best quarter in 42 years we are seeing the usual utter disdain for gold from banks and the media giving way to a bewildered respect.

Today sees a continuation of the battle for direction with the Technical picture still pointing down and prices clearly able to change direction in a heartbeat. When we look at the downside risks we see little to justify falls after a good search for the negatives. But we do find many factors that tell us there are few risks to the upside.

This will appeal to Asia which buys when they believe the falls are done. The developed world will enter on the rise.

Gold ETFs –  We saw sales of 1.189 tonnes of gold from the SPDR gold ETF on Friday. There were no purchases or sales into the Gold Trust on Friday. This leaves their holdings at 818.093 and 186.33 tonnes in the SPDR & Gold Trust respectively.  

Silver – The silver price remains locked onto gold’s moves but has opened the week trying to go below $15.00.

Julian D.W. Phillips | | StockBridge Management Alliance


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