gold ETF

If government trusts gold so much, shouldn’t you?

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Gold Today –Gold closed in New York at $1,244.10 down from $1,256.00 on Monday. On Tuesday morning in Asia, ahead of London’s opening it was pushed higher to $1,258.00. London pulled it back to see the LBMA price setting at $1,251.80 up from $1,244.25 yesterday.

The dollar index rose today to 95.61 after yesterday’s 95.12. More institutions are now accepting that the dollar’s bull run is over.

The dollar is stronger against the euro at $1.208 up from yesterday’s $1.1277.

The gold price in the euro was set at €1,116.88 up from €1,103.30 yesterday. Now the gold price is rising with the dollar again, contrary to ‘normal’ behavior.

Ahead of New York’s opening, the gold price was trading at $1,254.00 and in the euro at €1,116.95.

Silver Today –The silver price closed in New York at $15.86 up 4 cents on yesterday. Ahead of New York’s opening the silver price stood at $15.90.

Price Drivers

The gold price jumped $14 this morning as the dollar strengthened slightly. ETF buying is still underpinning prices in this volatile U.S. gold market. This is expected to be an ongoing pattern in the days ahead.

We usually hear two criticisms of gold, first that it gives no yield and second that it is bought in times of uncertainty.

As we see negative yields popping up in several countries and likely more to come, gold is now ‘yielding’ more than such currencies. Mervyn King, ex-Governor of the Bank of England, pointed out yesterday that interest rates are now a central bank tool to lower exchange rates. It is traditional thinking to believe that yield is very important and they will run to deposits as low-risk places to park savings. Today, such thinking is almost irresponsible, because you could deposit your money in the U.S. dollar, say, a month ago, to get a miniscule annual yield [before fees] and see it fall 4%+ within just a month! It’s worse in most other currencies! Gold, meanwhile, is an anchor to value.

As to gold being bought in times of uncertainty, what uncertainty? Economic uncertainty, or currency uncertainty? We suggest that it is currency uncertainty, which reflects central bank handling of currencies and their values. In each country this is different. With the dollar bull market now over, other currencies are going to struggle to fall, but all are likely to fall against gold as global currencies continue to fall, but not so much against each other, but in credibility.

In the developed world, there is a point at which investors will want to turn to gold heavily, but likely it will be too late to get low prices, as Asia has been sucking up available supplies for years now.

The classic example of distrust in a government controlled financial system is India, where distrust of government and banking has led to the population having an alternative financial system based on property and gold, usually out of sight of the government, because of the corrupt system of financial policing and bureaucratic interference.

In the developed world, trust in government and the banking system is complete, with the banking system essentially controlling all our transactions and taking fees from them. Until 1933 gold was an alternative, but this was removed as such, by confiscation. What happened to that gold? Government in the U.S. banned its use by individuals for 41 years and placed it in their reserves. Why? Governments needs that gold as insurance against their potential failure in managing currencies. If government trusts gold so much, shouldn’t you?

Gold ETFs There were purchases of 2.676 tonnes of gold into the SPDR gold ETF yesterday but no change in the Gold Trust. The holdings of the SPDR gold ETF are now at 821.661 tonnes and at 192.72 in the Gold Trust. While the purchase of gold into the SPDR gold ETF was significant it was not a huge amount relative to recent purchases. What is significant is that these sales did not touch gold prices until this morning in Asia.

Silver – The silver price continues to run ahead of gold and is showing a sterling performance today. It hasn’t broken away from gold yet and remains reliant on gold to give it direction. We continue to believe it is priced as a monetary metal, not on its fundamentals.

 

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

 

Gold keeps pushing higher – slowly but surely

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Gold Today –Gold closed in New York at $1,268.00 up from $1,260.80 in New York on Monday. In Asia on Tuesday, it moved higher to $1,274 and then in London until the LBMA price setting was set at $1,274.10 up from $1,267.60 yesterday. The dollar index is slightly lower at 97.17 down from 97.61 on Monday.

The dollar is down against the euro at $1.1009 from $1.0963 Monday. The gold price in the euro was set at €1,157.33 down from €1,156.25.

Ahead of New York’s opening, the gold price was trading at $1,277.70 and in the euro at €1,159.86.  

Silver Today –The silver price closed in New York at $15.65 up 16 cents.  Ahead of New York’s opening the silver price stood at $15.67.

Price Drivers

China saw 25% lower exports last month, but that month included the week long Chinese Lunar New Year, so a lower figure was expected. Likewise imports dropped 13%+. Because of that the falls should not be taken as a ‘hard landing’ for China. But it is clear that global growth is declining steadily. Monetary policy certainly won’t reverse this. Therefore the environment for gold remains positive and will do until governments across the world take effective action to promote growth.

Gold ETFs The holdings of both the SPDR gold ETF and the Gold Trust remained the same yesterday. This is the second day running that the holdings were barely changed and yet the gold price keeps pushing higher, slowly, but surely. This certainly does not have the appearance of a ‘spike’ but a steady solid set of rises.

COMEX  is seeing short covering and increases in long positions. A look at today and yesterday’s gold price shows that COMEX is no longer leading the way, but following prices as they rise now. Dealers too are getting more confidence in the gold price holding these levels.

We do see gold and silver markets remaining very volatile in New York in the coming days as liquidity levels remain under visible pressure. However, after yesterday, we expect the volatility to come in taking gold higher. Bear in mind, please, that physical gold buying in these markets does not create ‘spikes’. We expect COMEX to cause volatility as liquidity pressures continue, while London calms the market.

Silver – The silver price looks like it will hold its gains and move higher with gold.

 

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

 

And still the U.S. gold ETF buying goes on

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Gold Today –Gold closed in New York at $1,240.90 up from $1,232.70. In Asia on Thursday, it held slightly higher at $1,241 ahead of London’s opening. It then held there to be set by the LBMA at $1,241.95 up from $1,229.35. The dollar index is slightly lower at 98.21 down from 98.45.

The dollar is down against the euro at $1.0879 from yesterday’s $1.0853 on Thursday. The gold price in the euro was set at €1,141.60 up from €1,132.78.

Ahead of New York’s opening, the gold price was trading at $1,243.25 and in the euro at €1,142.80.  

Silver Today –The silver price closed in New York at $14.95 up 11 cents.  Ahead of New York’s opening the silver price stood at $14.95.

Price Drivers

Equity markets continue to rally today. But as the trading range tightens and the gold price moves to the top of the trading range, the prospects of a strong move happening comes closer. The tightening of the trading range implies a balancing between U.S. COMEX gold market buyers and sellers. Just as with a see-saw, once in balance, it takes a tiny amount on one or the other side to make the see-saw to move strongly one way or the other. We expect the trigger for this move to come out of the U.S.

London’s gold market is being bid for and there are two main contenders, apparently, the LME and the CME. The LME is owned by Hong Kong Exchanges and Clearing giving London a direct link to the Chinese market. For the London Bullion Market Association to remain relevant, it needs a link to the biggest physical gold market in the world. For it to go CME’s way it would be tied to the U.S. primarily paper market. Just as London is the developed world’s hub for Yuan trading so a tie to China’s gold market through the LME would keep London ‘relevant’ in the global gold market. This would enhance the structural reforms of the gold market being carried out in China and London right now.

So, if the bid goes the way of the CME, we would expect a divided global gold market. If the way of the LME we would expect the London gold price and the Shanghai gold price to far better reflect the demand and supply fundamentals than is the case at the moment!

Indian Gold Markets are on strike! As of now the Indian gold market is on strike against the 1% gold sales tax. This means that 35,000 jewelers across India including 7,000 in Chennai have downed tools.

The last time such a strike occurred, the government backtracked. Will they this time?

Gold ETFs An amount of 2.379 tonnes was bought into the SPDR gold ETF and a purchase of 0.27 of a tonne into the Gold Trust. The holdings of the SPDR gold ETF are now at 788.574 tonnes and at 190.14 tonnes in the Gold Trust.   But yesterday was different than the other days we saw in the week, because the equity rally continued and yet so did the gold buying.

Silver – The silver price lowered its volatile swings yesterday an rose with gold but still remaining under $15.00. If gold does jump $20 or just under 2% silver is likely to jump around 5%.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

Gold pawing the ground as ETFs continue to build

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Gold Today –Gold closed in New York at $1,236.80 up from Thursday’s $1,208.20. In Asia, it started to slip back and kept slipping in London’s morning until the LBMA set it at $1,221.50 up from $1,204.40 up $17.10 at yesterday’s setting. The dollar index is barely changed at 96.88 after yesterday’s level of 96.85.

The dollar is slightly stronger again, against the euro at $1.1102 up from $1.1116 on Thursday. The gold price in the euro was set at €1,100.25 up from €1,083.48.

Ahead of New York’s opening, the gold price rose to $1,231.70 and in the euro at €1,108.24.  

Silver Today –The silver price stood in Asia at $15.49 up 22 cents at the close in New York.  Ahead of New York’s opening the silver price stood at $15.46.

Price Drivers

Thursday saw purchases of 2.677 tonnes into the SPDR gold ETF and a purchase of 1.11 tonnes into the Gold Trust. Physical gold purchases are returning into these two, U.S.-based gold ETFs as gold now consolidates in a pattern promising a strong move shortly. The holdings of the SPDR gold ETF are now at 713.631 tonnes and at 181.50 tonnes in the Gold Trust.

With U.S. investors now firmly on the buy side, gold is ‘pawing the ground’ ready for a strong move. We believe this move will catch most market professionals off-guard and delineate where gold and by extension, silver prices are headed now.

Volatility comes most strongly when liquidity levels are low. The 3%+ moves of the gold price both ways in the gold market on COMEX, in the last few days in particular, are clear indications of this. To us this is also a sign that New York’s pricing power is falling. London, where liquidity is higher sees prices move in smaller ranges and it continues to pull prices back or up because of this. But with the large amounts leaving London for Switzerland [for refining into metric measurements] and directly to Asia liquidity is slowly but surely being reduced there too.

Most commentators are ignoring the developments coming in the Chinese gold market that are to start in April. These are structurally important to the gold price.

Silver – The silver price is robust with American investors confident silver will not fall soon.

 

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

Gold touches $1200 in dramatic surge

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Despite the Chinese market being closed for the Chinese New Year, the gold price has opened this week very strongly.  After a small dip overnight down to the mid $1,160s, it rapidly recovered any lost ground from Friday’s close, and then surged upwards through what many considered to be a key resistance level at $1,180.  At the time of writing it had pushed up to $1,196 and now commentators and analysts see it as heading to the $1,200 psychological level – a level it hasn’t see since June last year.  Indeed, as I write the gold price has surged from the high $1,170s to touching $1,200 in under an hour, before falling back to around $1,190.  Is this sign of the breakout the ardent gold bulls have been waiting for?

Sentiment towards gold appears to have made a complete sea change in the first five weeks of this year, not only in the world’s two biggest markets for physical gold, India and China, but now also in Europe and the USA, where the price tends to be set.  To an extent this is due to continuing serious nervousness in global equities markets.  For the past two to three years analysts have reckoned that gold had fallen out of favour as an asset class as far better returns were being made in the equities markets, but last year equities were largely flat, and ever since the U.S. Fed. commenced its so called interest rates normalisation programme, albeit with a tiny 25 basis points increase in mid-December. after a brief hiatus period equities have tanked and gold has been on the up.

Today, European equities markets opened lower, as did their U.S. counterparts, with the Dow falling back below 16,000 – it peaked last April at comfortably over 18,000.  Markets can move strongly in either direction, even in a day, but the overall trend since the beginning of the year has been sharply downwards.  The market pessimists have long been talking about a forthcoming equities crash, and now people are beginning to see this as a real possibility, and they are nervous.

Gold has thus been becoming a safe haven again.  We have seen purchases into the big gold ETFs heading towards erasing last years big liquidations in a matter of weeks.  Last week gold moved back up through its 200 day moving average, which reinforced other ‘buy’ signals, while panicky covering by some of the big holders of short gold positions will be adding to the surge.

Before gold investors get too euphoric though, it should be remembered that gold started last year really well too, with a similar surge, which took the then price up to around $1,296 by January 22nd – after opening the year at around the $1,170-1,180 mark (a rise of around 10% in only three weeks).  This year gold has risen so far by around 11% over five weeks – so a similar kind of increase.  Has the speed of the price increase been overdone?  Time will tell, and gold can be a somewhat fickle investment class, although long term it has tended to hold its value well.

Silver has not been immune to gold’s rise.  It was fixed this morning at the somewhat discredited London benchmark pricing system at $14.94 (although to be fair this was around the spot price at the time), but at the time of writing only a couple of hours later it had surged to $15.40 before falling back a few cents like its yellow sibling.

GLD gold ETF inflows year to date 21.8 tonnes

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After outflows of 66.6 tonnes over the whole of 2015 – admittedly encompassing some sharp ups and downs before reaching the year end – the SPDR Gold Trust ETF (GLD), the world’s largest gold ETF, has already clawed back around one third of this in the first three weeks of the current year.  At the end of last week the total gold holding in GLD stood at 664.2 tonnes, a rise of 21.8 tonnes over the three week period.

While this is still only around half the peak holding of 1,351.5 tonnes reached back in 2012, it does demonstrate that perhaps gold is indeed coming back into favour as a safe haven asset….

The above is the opening of my latest article on shapspixley.com.  To read the full article click on Do GLD ETF gold inflows suggest a positive sentiment change?

Follow the Money: Billionaire Investor Makes Huge Bet on Gold

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By Frank Holmes
CEO and Chief Investment Officer
U.S. Global Investors

This article is abstracted from a recent posting on the U.S. Global Investors website

I always advise investors to follow the smart money, and one person high on the list is Stanley Druckenmiller.

Second-quarter regulatory filings show that Stanley Druckenmiller, the famed hedge fund manager, just place more than $323 million of his own money into a gold ETF, at a time when sentiment toward the yellow metal is in the basement.

Investors should take note!

Druckenmiller Sees Gold as a “Home Run”

Druckenmiller has commented in the past that if he sees something that really excites him, he’ll bet the ranch on it.

druck

“The way to build long-term returns is through preservation of capital and home runs,” he said. “Grind it out until you’re up 30 to 40 percent, and then if you have the convictions, go for a 100-percent year.”

While I have always advocated for a diversified approach, this all-in approach has served him well. Between 1986 and 2010, the year he closed his fund to investors, Druckenmiller consistently delivered 30 percent on an average annual basis. Thirty percent a year! That’s a superhuman, Michael Jordan-caliber performance—or Ted Williams, if we want to stick to baseball imagery. The point is that words such as “legendary” and “titan” were invented with people like Druckenmiller in mind.

During his career, the man has made some now-mythic calls, the most storied and studied being his decision to short the British pound in 1992. This bet against the currency forced the British government to devalue the pound and withdraw it from the European Exchange Rate Mechanism (ERM), which is why many people say the trade “broke the Bank of England.” It also made Quantum, George Soros’s hedge fund, $1 billion.

And now he’s making a call on gold. The $323-million investment is currently the single largest position in Druckenmiller’s family fund. It’s twice as large, in fact, as its second-largest position, Facebook, and amounts to 20 percent of total fund holdings.

His conviction in gold can be traced to his criticism of the Federal Reserve’s policy of massive money-printing and near-zero interest rates. Such ongoing low rates push investors and central banks alike into other types of assets, including physical gold.

Concerns over government policy is why prudent investors hope for the best but prepare for the worst. I’ve always advocated a 10-percent weighting in gold: 5 percent in gold stocks, 5 percent in bullion, then rebalance every year. This is the case in good times and in bad.

Trump on Gold

Love him or hate him as a presidential candidate, Donald Trump has the same attitude toward owning gold in today’s easy-money economy. After leasing a floor of the Trump Building to Apmex, a precious metals exchange, he agreed back in 2011 to accept three 32-ounce bars of gold as the security deposit, according to TheStreet.

The U.S. dollar, Trump says, is “not being sustained by proper policy and proper thinking.” Accepting the gold “was an opportunity… to show people what’s happening with the dollar so we can do something about it.”

Trump and Druckenmiller aren’t the only ones adding to their gold positions right now. As I told Daniela Cambone on this week’s Gold Game Film, the Chinese government is now reporting its gold consumption on a monthly basis. In July it purchased 54 million ounces. This is significant in the country’s march to become a world-class currency that’s supported by the International Monetary Fund (IMF) for special drawing rights.

Both of our precious metals funds, Gold and Precious Metals Fund (USERX) and World Precious Minerals Fund (UNWPX), aim to offer protection against the sort of monetary instability Druckenmiller and Trump have warned us about.

Follow the money!

Gold awaits data-driven Fed’s next move

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Julian Phillips’ latest analysis of the gold and silver markets and their key drivers.

The key news of yesterday was the drop in U.S. GDP growth to 0.2% in the first quarter. More importantly the data coming out of the U.S. is for a continued slowdown with it possibly worsening. With no weather constraints now, the current quarter is crucial to what the Fed will do in the future. It has made it clear in the past that its actions are data driven so speculation as to whether a rate rise will happen in June, September or even later, appears pointless as future data will make that decision.

If the U.S. is slowing you can be sure the Eurozone is too, with the prospect of a recession there starting again. It is possible that, as different economic flows converge, we could see a very different global scene in the second half of the year to the one we are seeing now. How will that affect gold? One of the main flows that will directly affect gold this year is the continued path to a truly global gold market alongside the move of the Yuan to center stage in the global monetary system, while economic weakness returns. We see this to the detriment of the dollar. We know that the U.S. could use a much weaker dollar now, but China too, would like to see a steady to weak Yuan going forward. In this climate the environment for gold is distinctly positive.

Just remember that we have had 7 years of quantitative easing in the U.S. and now see it at massive levels in Japan and the Eurozone. If growth falters, questions about the abilities of governments to control growth jump up! That is gold positive!

Markets

New York gold closed at $1,204.00 down $8.20 on Wednesday. Asia saw it hold there and London took it up a dollar. The LBMA Gold price was set at $1,204.30 down only 50 cents. The euro equivalent stood at €1,076.13 down almost €20 while the dollar was weaker at $1.1192 down from $1.0993 against the euro. Ahead of New York’s opening, gold was trading in London at $1,203.40 and in the euro at €1,075.81.

The silver price closed at $16.53 down 8 cents on Wednesday. Ahead of New York’s opening it was trading at $16.57.

The dollar index fell, again, this morning  to 94.61 from 95.89 yesterday with the dollar continuing to lurch lower against the Euro from $1.1008 to $1.1212 today.   The fall of gold in the Euro is extraordinary and may spur arbitrageurs to lift the gold price in the Euro soon.  The question this poses is, “Is gold priced in the dollar or the euro?”  So now a weak dollar means a weak gold price?

There were no sales or purchases of gold from the SPDR gold E.T.F. or from or into the Gold Trust on Wednesday. The holdings of the SPDR gold ETF are at 739.065 tonnes and at 165.58 tonnes in the Gold Trust.

 

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

 

More SPDR gold ETF purchases show continuing institutional interest

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New York closed yesterday at $1,270.20 up $4.90. In Asia gold slipped slightly to $1,267.80 ahead of London’s. At the Fix gold was set at $1,264.00 up $0.24 and in the euro, at €1,103.641 down €3.067, while the euro was slightly stronger at $1.1453. Ahead of New York’s opening gold was trading in London at $1,265.00 and in the euro at €1,105.09.

The silver price closed at $17.30 down 6 cents. Ahead of New York’s opening it was trading at $17.27.

There were purchases of 5.376 tonnes of gold into the SPDR gold ETF but no change in the Gold Trust on Thursday. The holdings of the SPDR gold ETF are at 773.305 and at 167.75 tonnes in the Gold Trust.  The purchase yesterday was big enough to lift gold prices to current levels reflecting continued institutional interest in gold.

When we look at Europe, we see that specific political events don’t move precious metal prices by themselves. How those specific events impact the large monetary picture is what matters. Right now the euro is consolidating in the mid $1.14 area despite impending quantitative easing and the Greek debt negotiations, which should send the euro lower. That is, of course, provided the market is not discounting a Greek euro exit, which would strengthen the euro. As to Greece, the current chapter shows Germany in an avuncular manner putting the two Greek Ministers in their place, a big mistake, if they want the euro to remain intact. We do not believe the two leading Greek Ministers can take such a scolding quietly. In that scene, we now expect Greece, through these two politically committed men, to take that story up a notch.

With the Ukraine about to see its currency lose all credibility and the nation about to move to bankruptcy we are waiting to see if the U.S. and Eurozone are willing to take the Ukrainian civil war to an international one. Russia has made it clear it wants, at least, eastern Ukraine and will pay any price for it. This is well described by the exchange rate of the Ruble. The next week we see how far the West will go? It will affect the economic state of the Eurozone and may well eventually see a rupturing of gas supplies to Europe if the West takes the strife up to the next level. Only at that stage will it affect the gold price, we feel.

In China we are seeing the government increase liquidity in the system and aiding borrowers to lift growth. We cannot see China allowing deflation at this point in time, so will continue to follow the developed world by expanding their monetary base. We also expect to see them join the rest of the world by weakening the Yuan against the dollar. This continues to be gold positive.

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

Unstable global monetary environment favors gold and silver going forward

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Julian Phillips’ latest commentary on yesterday’s gold and silver market action and where they may go from here.

By Julian Phillips

New York closed at $1,182.60 on the last day of 2014 and the first trading day of 2015 saw the gold price stand at $1187.40 ahead of London’s opening. The Fix saw the gold price set at $1,184.25 down $15.00 and in the euro, at €983.351 down €3.991 while the euro was 1.23 cents weaker at $1.2043. Ahead of New York’s opening gold was trading in London at $1,183.10 and in the euro at €981.87.

The silver price was at $15.69 down 58 cents. Ahead of New York’s opening it was trading at $15.79.

Price Drivers

There were sales of 1.792 tonnes from the SPDR gold ETF and sales of 0.55 of a tonne from the Gold Trust before the year’s end. In thin holiday trade, alongside the falling euro, traders knocked the gold price back to the $1,180 area as the euro began today a cent lower at $1.2051. While the holiday continues until next week, we expect the euro’s fall to dominate the gold prices, until real volumes return to the gold market. The holdings of the SPDR gold ETF are at 709.16 and at 161.18 tonnes in the Gold Trust.

We expect 2015 to be a year where currency dramas keep popping up as the dollar rises and the rest of the world’s currencies fall. The oil price collapse is benefitting all nations as well as the U.S. dollar as oil import costs fall to around half of last year’s levels. In most countries these costs make up a big proportion of imports. But because all non-oil producing countries are benefitting it is a common denominator so cancelling out the impact on most exchange rates. Attention therefore reverts back to interest rates, with the U.S. offering higher rates than the Eurozone, placing continual downward pressure on the euro and upward pressure on the dollar. This will continue to be the case throughout 2015.

In addition we do expect the Chinese Yuan ‘peg’ to the dollar to be lowered as the dollar rises. After all, China exports globally, not just to the U.S. More importantly we cannot see a case for the Yuan to see a higher exchange rate in the eyes of that government, no matter what other countries say.

The volatility we expect to see in exchange rates will create an unstable international monetary environment favoring gold going forward. Please bear in mind that the current monetary system is not the result of design but consequences. We do not believe it has the capacity to withstand the heavy pressures that lie ahead in 2015/16.

Silver– While the silver price is and will following gold it has become considerably more volatile as U.S. traders see more profit opportunities in silver than gold. This will continue until gold holds above $1,210, we feel.

Julian Phillips is founder and editor of www.goldforecaster.com and www.silverforecaster.com