Gold and Silver bounce most likely!

Gold TodayGold closed in New York at $1,214.90 down from $1,223.20 on Monday. On Tuesday morning in Asia, it rose to $1,226. London lifted it up to see the LBMA price setting at $1,231.50 up from $1,215.00 on Monday.

The dollar index is slightly higher at 94.72 up from 94.59 yesterday. The dollar is stronger against the euro at $1.1370 up from $1.1386 on Monday.

The gold price in the euro was set at €1,083.11 up from €1,067.19 on Monday.

Ahead of New York’s opening, the gold price was trading at $1,231.90 and in the euro at €1,083.32.  

Silver Today –The silver price closed in New York at $14.92 down from $15.05 down 13 cents on Monday. Ahead of New York’s opening the silver price stood at $15.15.

Price Drivers

While sales from the SPDR gold ETF continued but purchases into the Gold Trust resumed, we appear to be seeing a bottoming in U.S. investor physical activity in the U.S. based gold ETFs.

Nevertheless, with it becoming clear that the dollar is no longer going to rise to new highs, COMEX is becoming cautious over moving gold and silver prices down at these levels.

It does appear that $1,200 and $15 on gold and silver respectively are strong support levels and ones from which both seem about to bounce.

Dollar consolidating After a period of weakness, the dollar is now consolidating at close to its lows. With the oil price falling again, the need for U.S. dollars is once again diminishing. All in all, the need for dollars has diminished considerably over the last couple of years.

With the international aggressiveness of the U.S. IRS chasing U.S. citizens across the world, some European nations have not only rejected U.S. clients but the use of the dollar in precious metal dealing, as well as in other transactions. So, when we said yesterday that “It does mean that the dollar has seen its peak against other currencies” we add to that the use of the dollar in international trade has also peaked.

The awareness of the global economy, oil factors and their state has impacted on Fed [and Treasury] policy and is feeding through to the dollar in amongst global currencies. Dollar hegemony is fading. The consequential impact on gold and, by extension, silver, will increase in favor of gold and silver prices over time.

Gold ETFs – We saw sales of 2.378 tonnes of gold from the SPDR gold ETF on Monday. There were purchases of 0.91 of a tonne of gold into the Gold Trust on Monday. This leaves their holdings at 815.715 and 187.24 tonnes in the SPDR & Gold Trust respectively.  

It seems more than improbable that investors that have bought over 200 tonnes into these two gold ETFs would suddenly want to get out. Their moves into the market, at much lower prices, were clearly strategic positioning ahead of rises in the future. We would go as far as to say that their investments signaled a change of trend to the upside.

Silver – The silver price, as with gold is consolidating around $15 signaling that a bounce is most likely.

Julian D.W. Phillips | | StockBridge Management Alliance

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