Gold bought into GLD again. Price moves upwards

Gold TodayGold closed in New York at $1,223.30 down from $1,230.20 on Wednesday. On Thursday morning in Asia, it rose to $1,230. London lifted it higher to see the LBMA price setting at $1,237.50 up from $1,225.75 on Wednesday.

The dollar index is slightly lower at 94.38 down from 94.93 yesterday. The dollar is stronger against the euro at $1.1391 up from $1.1345 on Wednesday.

The gold price in the euro was set at €1,086.38 up from €1,080.43 on Wednesday.

Ahead of New York’s opening, the gold price was trading at $1,237.10 and in the euro at €1,085.99.  

Silver Today –The silver price closed in New York at $15.07 down from $15.13, down 6 cents yesterday. Ahead of New York’s opening the silver price stood at $15.22.

Price Drivers

With the arrival of new large volume purchases into the gold ETFs in the U.S. we should see the price respond as liquidity levels of physical gold are dropping. Likewise the trading pattern of both gold and silver continue to tighten, particularly in gold. We continue to be braced for a strong move, in the near future.

Dollar weakness continues

The Fed in its minutes of the latest FOMC meeting confirmed its concern over the global economy and the strong dollar. This weakened the dollar against world currencies and to us confirmed the dollar faces a future of either sideways movements or of falling lower against other leading currencies. We cannot emphasize enough the importance of a weak dollar on global financial markets and the monetary system itself in future market action globally.

Because U.S. markets tend to move gold in the opposite direction to the dollar, we see a positive long-term future for gold. This may well reflect in the short-term too.

The Yen & Yuan

The dollar index continues to fall steadily, but the big feature of the morning is Yen ‘strength’ now at 108.44 against the dollar. This is just what Japan does not want. The economic problems of Japan are chronic and fundamental, with no easy solution [as Abenomics suggested there would be]. Without a weakening Yen, Japan is in recession, with little chance of it coming out of it in the foreseeable future. We emphasize that this is a weakening dollar and not a strengthening Yen.

A ‘stronger’ Yen confirms that. It makes Japan’s exports less competitive.

Having said that, the Chinese Yuan is also strong against a weakening dollar. But China is allowing that to be so, as they focus on the September activation of the Yuan as part of the IMF’s SDR.

Gold ETFs – We saw purchases of 4.16 tonnes of gold bought into the SPDR gold ETF on Wednesday. There were no sales or purchases into or from the Gold Trust yesterday. This leaves their holdings at 819.596 and 186.96 tonnes in the SPDR & Gold Trust respectively.  

These renewed large purchases into GLD are consistent with the buying pattern of the buyer who started buying large volumes of gold when the gold price turned at $1,150. The timing appears to be just ahead of more large rises in the gold price. We expect to see gold prices respond strongly to such buying, now that the market is looking ‘in balance’.

Silver – The silver price continues to be consolidating around $15 still, ahead of a strong move.

Julian D.W. Phillips | | StockBridge Management Alliance

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