Draghi

Gold volatile on ECB statement: SPDR gold buying recommences

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Gold Today –Gold closed in New York at $1,253.90 down from $1,261.40 Wednesday. In Asia this morning, it moved lower to $1,245 and then held there  in London until the LBMA price setting was set at $1,247.25 down from $1,258.25. The dollar index is slightly higher at 97.37 down from 97.17 on Tuesday.

The dollar is up against the euro at $1.0972 from $1.0963 on Wednesday. The gold price in the euro was set at €1,136.76 down from €1,143.83.

Ahead of New York’s opening, the gold price was trading at $1,248.00 and in the euro at €1,137.44.  

Silver Today –The silver price closed in New York at $15.31 down 5 cents.  Ahead of New York’s opening the silver price stood at $15.27.

Price Drivers

E.U. Today at 12.45 European time Draghi of the E.C.B. announced more stimulus measures, including a further lowering of interest rates and a boost to the amounts of QE. This has been discounted in the gold price already, with gold’s price threatening the Technical picture now.

But the broad opinion is now that his stimuli will have little impact. We are watching the exchange rate of the euro to the dollar in particular. We have said before that the U.S. does not want to see a strong dollar, particularly against the euro and will not want the dollar index over 100 or the euro lower than $1.05 to $1.07.  Gold slipped sharply on the news, but then picked up again even more strongly.

With governments in the E.U. having done too little, we expected Draghi to give them a mild castigation once more, but it is difficult to see if it is either possible or reasonable to expect him to do much more than he has. Hence we do expect to see the E.U. growth coming under pressure alongside the global economy, which is now in recession. Will we see the “derailment” the IMF has warned about? Standing back and gazing at the big picture, we see little reason to expect growth to be lifted no matter what Draghi does. If he disappoints then we may see the ‘derailment’ soon. The scene remains gold positive!

Gold ETFs There were purchases of 2.081 tonnes of gold into the SPDR gold ETF and purchases of 0.45 of a tonne into the Gold Trust yesterday. The holdings of the SPDR gold ETF are now at 792.820 tonnes and at 191.52 in the Gold Trust. While this was a reasonable level of buying into the two gold ETFs in the U.S. fears of what the market will do after Draghi’s announcement caused dealers to pull prices back.

Because, once again, physical sales were not a feature, we expect the gold price to be volatile today. If the euro does not fall strongly, we expect physical gold buyers to rush back in.

What is clear is that today will become a higher risk day than most.

Silver – The silver price remains on the back foot waiting for gold to go higher.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

Huge purchases into SPDR Gold Trust boost gold price

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The New York gold price closed Monday at $1,129.20 up from $1,117.30 up $11.90. In Asia on Tuesday, it slipped to $1,126.35 ahead of London’s opening and then the LBMA set it at $1,123.60 up $1.60 with the dollar index down at 98.91 up from 99.40 Monday. The euro was up at $1.0918 down from $1.0863 against the dollar. The gold price in the euro was set at €1,029.13 down from €1,032.86. Ahead of New York’s opening, the gold price was trading at $1,125.15 and in the euro at €1,030.55.  

The silver price in New York closed at $14.35 up 8 cents at Monday’s close.  Ahead of New York’s opening, the silver price stood at $14.26.

Price Drivers

Monday saw a huge purchase of 12.196 tonnes into the SPDR gold ETF but none into the Gold Trust. The holdings of the SPDR gold ETF are now at 681.425 tonnes and at 166.45 tonnes in the Gold Trust. The huge purchase was responsible for gold’s rise yesterday and took the gold price back to resistance [small] at $1,130. The gold price picture remains technically positive.

Mario Draghi’s statement yesterday surprised us with its content. He is a brave central banker made so by his calls to E.U. governments to ‘step up’ and take action to lift prospects in the E.U. Governments have been sadly lacking in this area since the start of the credit crunch in 2007. They continue to be so passing the buck to central banks. Only so much can be achieved by central bank policies and without the support of governments, eventually central banks will fail to deliver. What he said yesterday is, to us, a signal that there is little more the E.C.B. can do and they should not be ‘blamed’ for a lack of solid economic growth. This raises the prospect of failing economic strength and disunity in the E.U.

If the U.S. sees a downturn for at least one quarter the E.U. will fare far worse. The E.U. wants a weaker euro to grasp at other nations exports, but is now unlikely to get it. The real answer lies in going to the consumer and boosting his income, job security and the value of his assets. Until this happens economic prospects in the developed world are unlikely to improve.

With the Yen falling again due to negative interest rates the likelihood of a ‘currency war’ is real. China will not tolerate being expected to hold its currency up [when it should fall] while Japan is taking advantage by intentionally lowering its exchange rate. This is ‘war’ and will meet with a reaction when it suits China. China has its own Q.E. program [a rose by any other name] and to hold the Yuan up, has de facto exchange controls in position, but may well formalize these shortly. This will be positive for gold in all currencies as the ‘war’ produces casualties.

Silver should hold its gains but will be more volatile than gold.

Julian D.W. Phillips for the Gold & Silver Forecasters – www.goldforecaster.com and www.silverforecaster.com

Don’t short the Euro – Draghi. Contrarian indicator?

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Julian Phillips’ comments on the gold and silver markets today and factors driving the prices.

New York closed at $1,204.50 up $5.50 on Friday in NY. Asia took it up to $1,208 with London holding it there ahead of the LBMA Gold Price. The LBMA Gold price was set at $1,203.25 down $1.30. The euro equivalent stood at €1,118.83 up €7.11 against a weaker $: € rate of $1.0753 against yesterday’s $1.08355. Ahead of New York’s opening, gold was trading lower in London at $1,198.30 and in the euro at €1,115.68.

The silver price closed at $16.26 down 3 cents on Friday. Ahead of New York’s opening it was trading at $16.05.

The dollar began the week at $1.0781 and the dollar index at 97.52 showing a consolidating dollar more than a rising euro. Gold moved through its trading range, ahead of New York’s opening. Once again the gold price was essentially moved sideways ahead of New York’s opening confirming the tightness of the trading range implying a strong move anytime.

The E.C.B.’ Draghi told the media on Friday that it was pointless to short the euro. History shows that when a central banker attempts to stall the movement of a market trend, it is taken as an incentive to do the opposite. We don’t see why this time an exception should be made. As we said last week, “The factors that drove the dollar higher remain in position and the trend remains for a stronger dollar.” After all, the E.U. is gaining competitiveness enormously by the fall in its exchange rate.

To us the Greek situation is becoming more transparent as Greece said it won’t renege on election pledges to end austerity measures. The Deputy Prime Minister said, “We don’t budge from our red lines.” Now look at the laid back attitude of the Prime and Finance Ministers of Greece and we see them waiting for the E.U. to give a solution as they are unlikely to do more. Unless the E.U. offers more money Greece will be ejected from the euro. The tragedy will therefore grind on until June with the euro tending to weaken until then [we remind readers that  the euro trend is down while E.U.Q.E. continues through to Sept 2016].

There were purchases of 2.988 tonnes into the SPDR gold E.T.F. but no change in the Gold Trust on Friday. The holdings of the SPDR gold ETF are at 739.069 tonnes and at 165.28 tonnes in the Gold Trust.

From today onwards we expect Indian demand to subside as the festival season comes to an end.

Julian D.W. Phillips for the Gold & Silver Forecasters- www.goldforecaster.com and www.silverforecaster.com

 

Gold to move to role to reinforce currency credibility

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Julian Phillips’ latest take on the global gold and silver markets and their monetary role.

Mario Draghi, who heads up the ECB, is doing what he says he would by launching QE in Europe. At Eur60 billion a month, until Sept 2016, this could leave room for more to come, if necessary. The euro will fall, much more as we see today.

He did water it down slightly by making national central banks do most of the work and carrying the risk. Only the governments of Europe can take it further. Draghi has now used up his arsenal of tools.  Sad to say, we do not see this creating economic growth over time in itself.

The oil price can help, as can the lower euro but with all currencies [except the dollar] ‘racing to the bottom’ how long will this do what it’s intended to? If economic stagnation continues to come closer, more money in shrinking economies will turn against the E.U. Rather like the man who has borrowed too much the loss of credibility will turn QE into an implosion.  The strain on the E.U., as a structure, may be too much.

The elections on Sunday in Greece may produce the first fracture in this E.U. structure? If E.U. QE does not produce growth, then we believe we will enter a dangerous period for the world. The tsunami from the financial world will hit the rest of the world’s structures, with governments entering crises not see since the last war in Europe.

More importantly, the stress on the global monetary system itself is now rising, as volatility in exchange rates and capital flows across the system are creating separate pressures. We see gold moving from a ‘safe-haven’ investment to a role where it will be used to reinforce credibility in the world of currencies.

Again, the silver price is keen to hold its gains waiting for gold to hold above $1,300.

On the markets, New York closed yesterday at $1,303.70 up $10.20 as the euro started to really tumble again. In Asia and early London the gold price slipped slightly to $1,296.60 with the euro much weaker at $1.1324 down 2.66 cents against the dollar. The Fix saw the gold price set at $1,293.50 up $6.50 and in the euro, at €1,150.289 up €42.334, while the euro was 3.76cents weaker at $1.1240. Ahead of New York’s opening gold was trading in London uncertainly, at $1,294.00 and in the euro at €1,151.86.

The silver price closed at $18.38 up 23 cents. Ahead of New York’s opening it was trading uncertainly at $18.20.

There were no sales or purchases of gold from or into the SPDR gold ETF but a sale of 0.63 of a tonne from the Gold Trust on Thursday. The holdings of the SPDR gold ETF are at 740.451 and at 166.99 tonnes in the Gold Trust

 

Julian D.W. Phillips for the Gold & Silver Forecasters – www.goldforecaster.com and www.silverforecaster.com