Gold and silver to play increasing role in future multi-currency system

On Friday New York closed at $1,115.20, unchanged on Thursday. The dollar was slightly stronger at $1.1100 down from $1.1142 with the dollar Index weaker at 96.69 down from 96.42 on Monday morning. This morning the LBMA gold price was set at $1,117.30 up $0.55. The euro equivalent was €1,005.67 up €2.44. Ahead of New York’s opening, gold was trading in tight 30 point spread still around $1,121.65 and in the euro at €1,008.22.  

The silver price closed at $15.22 down 19 cents in New York on Friday. Ahead of New York’s opening today it was trading at $15.37.

Price Drivers

Last week the IMF confirmed that the Chinese economy is now the largest in the world. What does this mean for gold and silver investors? With the love for gold the Chinese and other Asian nations have, it means that demand for gold from there will persist and grow all the way. Other Asian demand will follow it alongside the growth in demand from India. We are two weeks from the start of the ‘gold season’.

More importantly for global demand for gold and silver it means that the global monetary system of the last 60+ years will have to change as China exerts a different force over it, making the peaceful currency system we have seen over all these year [Dollar hegemony] weaken and change into a multi-currency system in a more uncertain and unstable world. This brings gold and silver back to an important role in the extreme times we face. We have seen the start of this in the last two weeks.

We have seen sales of 31 tonnes of gold from Paulson’s ETF by the end of June and purchases of 9.15 tonnes by Druckenmiller. These are large funds and not prone to speculation in physical gold sales and purchases. However, there could be advantages to selling COMEX positions alongside such sales, profiting from subsequent price falls, but this would conflict with the big buyers coming into the market. We are inclined to believe that neither of these two funds played speculative games in the last month but that the large bear raids came from other sources.

There were no sales or purchases in either the SPDR gold ETF or the Gold Trust on Friday leaving the holdings of the SPDR gold ETF at 671.867 tonnes and 161.02 tonnes in the Gold Trust.  

Silver– Silver is still ready to run.

Julian D.W. Phillips for the Gold & Silver Forecasters – and