Julian Phillips looks at the price drivers currently affecting the precious metals markets
There is nothing new, short-term in the gold and silver markets now as the Saudi incursion into the Yemen has been discounted in the oil and precious metal prices.
Today sees the funding of the Asian Infrastructure Investment Bank (AIIB) with 40 countries now buying into the bank, but with the U.S. and Japan absent from the offering. European and Asian nations make up the majority of the investors. The significance of this for precious metal investors lies in the division of the US/Japan and China as the Chinese presence in the monetary world moves towards centre stage later this year. The division between the US/Japan and Asia augurs volatility in global foreign exchanges, when Capital Controls are lowered in China and the IMF discusses the make-up of the SDR, sometime this year.
Meanwhile, the official volume of gold entering the Chinese economy from outside has to pass through the Shanghai Gold Exchange, which is under the control of the People’s Bank of China (The Chinese Central Bank). The volume for the first quarter of the year has already reached 561 tonnes with perhaps up to another 80 tonnes to come to complete the quarter. (See: China gold flows to hit Q1 record). This sets a new record for the SGE, higher than the volume seen early in 2013 when the gold price produced the Chinese version of a gold rush on the exchange.
The dollar is grew stronger overnight taking the dollar Index back to 98.46 up from at the end of last week, while the euro is slipping to $1.0741 down from $1.8270 last week. The dollar needs to break up through 100 on the dollar index to show it has higher to go. The gold price remains strong in all currencies except the dollar where it is not tumbling but not rising either. Gold’s strength in other currencies remains convincing.