Gold rises, silver soars – but……

Gold TodayGold closed in New York at $1,245.80 on Wednesday. On Thursday morning in Asia, it jumped up to $1,258 and London followed through to set it at the LBMA price setting at $1,257.65, up from $1,247.75, on Thursday.

The dollar index is higher today, at 94.45 down from 94.05 on Wednesday. The dollar is stronger against the euro at $1.1315 down from $1.1366 Tuesday.

The gold price in the euro was set at €1,111.49 up from €1,097.57 Thursday.

Yuan Gold Fix

The Shanghai PM gold benchmark price was 261.82 yuan per gram – around US$1,256.22 at the latest $/yuan exchange rate.  Again this is not hugely different from the LBMA figure which again suggests that for the moment China is not trying to front run the market.

Ahead of New York’s opening, the gold price was trading at US$1,267.30 and in the euro at €1,117.30.  After hitting a little over $1,270 in spot trade it has since been brought down very sharply indeed and at the time of publication had fallen back to below $1,250.

Silver Today –The silver price closed in New York higher at $16.97 on Wednesday. Ahead of New York’s opening the silver price stood at $17.60.

Price Drivers

The gold price is breaking through overhead resistance solidly on a daily basis. This is remarkable in the light of ‘stale’ bull selling. As you can see below the last two days has seen significant sales from the SPDR gold ETF, but this has not dented the price rise, implying that there is considerable underlying strength in the gold price. At the moment this is not due to a weak dollar as the dollar is stronger today.

It is the day when Mario Draghi makes a statement from the E.C.B. He is not expected to raise interest rates in the light of the very weak levels of growth and inflation. The continued narrowing of company margins, lower turnovers and the castigation of Spain for not following through on structural changes by the I.M.F., makes the future darker than has been seen for some time. Pressures on the E.U. remain discouraging to the extent that the U.S. Fed is looking at the global picture when contemplating rate hikes.

With debt level burdens across the world far too high [and at disturbing levels in China there are growing concerns of debt default, particularly in the corporate sector. And it is into that sector that money is flowing in the hopes of capturing yields which cannot be found in the interest rate markets across the globe. This is not the traditional reason for buying equities. Expectations of growing yields, drives demand for equities, not a retreat from interest rates.

Gold ETFs – In the last two days, we have seen sales of 7.43 tonnes from the SPDR gold ETF and sales of 0.48 of a tonne from the Gold Trust. This leaves their holdings at 805.032 and 187.56 tonnes in the SPDR & Gold Trust respectively.  

Silver – The silver price is amazing all as it continued to soar. Since yesterday it has risen 3.71%. It does appear to have a very long way to go up still, running ahead of the gold price. While the two metals are usually treated as monetary metals [alternatives to currencies] silver’s historic price performance is far more vigorous than gold and far more volatile. It is a narrower market than gold, which has many facets in its monetary role. Nevertheless, right now retail investors as well as institutional investors note its historic performance [peak $50 an ounce] and Technical background which points to a sterling performance.  But again, like gold, it has been brought back very sharply from its early high of $17.79.  At publication it had fallen back a full dollar.

Julian D.W. Phillips | | StockBridge Management Alliance

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