Julian Phillips’ latest analysis of the gold and silver markets makes the point that Chinese and Indian demand remain the main price drivers while the number of global geopolitical factors which can affect the gold price remain large.
New York closed on Friday at $1,284.3 up $26.70. In Asia gold held that level but London pulled it back to $1,275. At the Fix gold was set at $1,274.25 up $10.75 and in the euro, at €1,122.687 up €7.703, while the euro was stronger at $1.1350. Ahead of New York’s opening gold was trading in London better, at $1,277.30 and in the euro at €1,126.12.
The silver price closed at $17.26 up 31 cents. Ahead of New York’s opening it was trading uncertainly at $16.19.
There were no purchases or sales from or into the SPDR gold ETF or the Gold Trust on Friday. While traders and speculators moved the gold and silver prices around, the lack of physical gold sales took away the importance of these moves, for physical actions determine the gold price.
Today it remains in a similar area, with two weeks to go before the Chinese New Year. The current consolidation is some way above support. The tone of the market is good. The main gold driver remains Asian demand. With the Wedding season in India ongoing until May, Indian demand remains strong. In China, while the market will quieten down immediately after the 17th Feb underlying demand remains persistent on an ongoing basis.
The euro is slightly stronger today at $1,343 while the dollar index remains strong at 94.66. The foreign exchanges of the world are calming down at the moment, but for how long? We do believe that the Fed will use swap arrangements to calm the market and may well have set a desirable euro exchange rate level at around $1.13. We doubt that a particular exchange rate level will be defended for fear of a similar situation the Swiss Franc found itself in.
The number of global events that can affect gold remains large. At the start of the week, the most imminent remains Greece, but no immediate resolution one way or the other is in the offing yet.
In the Ukraine we believe the scene there is degenerating into a full scale war between Russia and the Ukraine, as the U.S. considers supplying lethal weapons to the Ukraine. Its impact on gold will primarily be felt in the Eurozone, where investors will be concerned with the stability of the euro as a result of this, but we don’t believe there will be no sudden rush into gold from that quarter.