Gold breaks through overhead resistance.  Dollar still weakening

Gold TodayGold closed in New York at $1,256.10 up from $1,247.25 on Monday. On Tuesday morning in Asia, it jumped to $1,259. London took it up to $1,260 to see the LBMA price setting at $1,259.20 up from $1,247.25 on Monday.

The dollar index is lower at 93.85 down from 94.22 Monday. The dollar is weaker against the euro at $1.1419 up from $1.1391 on yesterday.

The gold price in the euro was set at €1,102.72 up from €1,095.23 Monday.

Ahead of New York’s opening, the gold price was trading at $1,261.65 and in the euro at €1,106.90.  

Silver Today –The silver price closed in New York at $15.90 up from $15.34 on Monday. Ahead of New York’s opening the silver price stood at $16.12.

Price Drivers

And so we have broken through overhead resistance, so where next?

Surprisingly, the rise was not driven by U.S. ETF shares buying, but prompted by dollar weakness which now continues across the currency board. Against the euro $1.15 appears to be an initial target.

Once again most investors appear to be surprised and expect a rally in the dollar. Many rely on the potential two interest rate hikes expected this year [despite the possibility of no interest rate hikes at all] to take the dollar higher in the belief this will give value to the dollar. Those in the ‘carry’ trade may well disagree strongly with this. After all when you look at the peak in the dollar of 100 and at current levels, what benefit in getting an annual extra half a percent if you lose 8% of your capital at least?

Exchange rates are key to the financial world this year, as the dollar retreats from hegemony into one of five key global currencies in a multi currency system. Of these the Yuan has the advantage, as it is starting off with only a small presence but one that is set to rise to profound significance in the year and years to come. This rise will be at the expense of the dollar and the euro primarily. The Fed fully understands this.

It is the change in the composition of central bank currency reserves that will ruffle the feathers of global financial markets in the future. This has not been factored into these markets even now.

Gold and silver will surprise everyone this year!

Gold ETFs – We saw no sales or purchases into or from the SPDR gold ETF but a purchase of 0.48 of a tonne into the Gold Trust on Monday. This leaves their holdings at 817.813 and 187.74 tonnes in the SPDR & Gold Trust respectively.  

Silver – The silver price is running full pelt ahead of gold and should continue to do so as gold rises.

Julian D.W. Phillips | | StockBridge Management Alliance

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