Gold and Silver:  Like a cat waiting to pounce

Yesterday was a quiet day for the gold, silver and currency markets after alarming, stronger moves in the Yen and while Janet Yellen’s comments were being digested. Today sees the same process going on, but the tightening of the trading range of both gold and silver tells us a strong move is imminent.

This is one of those days in the precious metal markets when people are looking around, waiting for something to happen. It’s Friday now, the day when we usually see the most action.

In our opinion the markets in gold and silver are rather like a cat getting ready to pounce. We expect the moves to be higher, but it could need more days of consolidation such as we have seen in the last week.

It’s also one of those days when one stands back to fine tune one’s perspective. When we do that we see the Fed [and Treasury] making clear that they don’t want a strong dollar, something the media seems unwilling to accept. The consequences of this are to see the anguish among emerging and other developed world central banks as they see their currencies strengthen. Japan is openly discussing ways of making their currency weaker while at the same time Abe is stating countries should not intentionally weaken their currencies. Are we to believe that they do not intend to weaken their currency with their present interest rate policies? Surely not!

Interest rates and their prospects are driving exchange rates globally as well as equity markets. Their rises have little to do with positive economic prospects, making such rises stand on questionable foundations. This leaves them vulnerable.

With the ‘powers that be’ themselves warning of future crises, the prospects for gold and silver remain good and not subject to single daily events.

China added 9.02 tonnes of gold to its reserves last month. This is down from over 20 tonnes the previous month.

Gold ETFs – We saw no sales or purchases into the SPDR gold ETF on Thursday. There were however, purchases of 0.3 of a tonne into the Gold Trust yesterday. This leaves their holdings at 819.596 and 187.26 tonnes in the SPDR & Gold Trust respectively.  

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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