Gold Today –Gold closed in New York at $1,228.00 on Tuesday, down from Monday’s $1,249.60, a fall of $21.60. On Wednesday morning in Asia it fell to $1,224 while the U.S. dollar was stronger against the euro.

LBMA price setting:  $1,220.75 down from Monday’s $1,242.65.

Yuan Gold Fix

Trade Date	Contract	Benchmark Price AM	Benchmark Price PM
2016  05  25 2016  05  24	SHAU SHAU	259.64 263.32	258.68 262.98
Dollar equivalent @ $1: 6.5640 +$1: 6.5600		$1,230.30 $1,248.50	$1,225.75 $1,246.89

The movements in the gold price were a reflection of the stronger dollar against the euro, but against other currencies the dollar was weakening.  While we may well see more falls in the gold price we are getting very close to support.

We are seeing a strong sterling at $1.47 and yet a weak euro at $1.1143 and a steady Dollar Index at 95.55 slightly up from yesterday’s 95.47. With the failure of the G-7’s intention to not use exchange rates for international trade for competitive reasons, it seems that we are moving towards all nations looking out for their own interests, exclusively on the currency front.

The signal that this was on the cards really came when the U.S. dollar index hit 100 at its peak and then failed to get there again. As we have said many times, neither the Fed nor the U.S. Treasury wants a strong dollar and are taking action to ensure it does not happen.

At the same time, due to the gold market’s propensity to move gold the opposite way to the dollar, we saw a floor put under the gold price. Since then the number of U.S. institutional investors in gold and silver has jumped dramatically. The volume of their gold purchases through the shares of gold ETFs has soared, but their recent impact on the gold price has been close to zero.

When gold prices, and by extension, silver prices fail to respond to such high demand it allows buying to stay at massive levels, which in turn will, in time, lead to a shortage of supply, which cannot be sustained at low prices. Prices have to react eventually.

The gold price in the euro was set at €1,096.12 down from Tuesday’s €1,112.39.

Ahead of New York’s opening, the gold price was trading at $1,223.65 and in the euro at €1,098.13.  

Silver Today –The silver price closed in New York on Tuesday at $16.23, lower than Monday’s $16.40 a fall of eleven cents. Nevertheless it remains well over $15.00 and looks as though it will hold there, while waiting for gold to turn, before it sprints again.

Ahead of New York’s opening the silver price stood at $16.29.

Price Drivers

Yesterday saw the gold price knocked down once again, but this time from gold ETF selling, as well as exchange rate movements.  There is no doubt that the gold price bears little relation to demand and supply factors.

The seasonal factors in the gold market are in play, for sure. In India we have moved out of the ‘marriage season’ into the period where the main gold buyers turn to farming ahead of the Monsoon. This will last until the crops are sold and the festive season begins in September. This seasonal influence has been tempered by urbanization in India, which continues at a fast pace.

We are moving towards the European holiday season too. August is the big holiday period where businesses in the gold industry are at their low point ahead of the end of the holiday season in September.

This period in the year is called the “Doldrums” in the gold world.

The June to September period is the time when the main influences on the gold price are macro-economic and currency factors. Don’t necessarily think that this means that gold prices will go lower. The point at which gold hit its peak, in this decade, was during this time of the year.

What is also for sure is that currency factors are disturbing, in terms of the structure of the global currency market. This implies a large potential for gold price volatility. We suggest that gold market followers look at gold only in their own currencies and that investors take positions in weakening currencies alongside their gold positions.

Gold ETFs – Tuesday, for the first time in weeks, saw selling from the SPDR gold ETF (GLD). We saw sales of 3.592 tonnes from the SPDR gold ETF but nothing into the Gold Trust (IAU). This leaves their holdings at 868.662 and 199.43 tonnes in the SPDR & Gold Trust, respectively.

While, large volumes of buying are having no impact, yesterday saw selling having an impact on gold prices, which, while they were also moving against exchange rates, did fall on this selling.

Silver –The silver price may try to go lower still but has a resilience to it that makes downward falls difficult to hold at lower levels.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance