Julian Phillips’ gold and silver market report and his views on the key price drivers behind the latest price movements.
New York gold closed at $1,212.20 up $9.80 on Tuesday. Asia saw it slip to $1,208 and London held it there. The LBMA Gold price was set at $1,204.80 below market trading prices and up $3.40. The euro equivalent stood at €1,096.17 down €4.52 while the dollar was weaker at $1.0993 down from $1.0916 against the euro. Ahead of New York’s opening, gold was trading higher in London at $1,206.20 and in the euro at €1,096.65.
The silver price closed at $16.61 up 23 cents on Tuesday. Ahead of New York’s opening it was trading at $16.47.
There remains a great deal of scope for short covering in the gold and silver markets still. The gold price is above the 50-day average now, so consolidation is likely. The dollar index fell, again, to 95.89 down from 96.53 yesterday and the dollar continued its fall to leave the euro at $1.1008. There were no sales or purchases of gold from the SPDR gold E.T.F. or from or into the Gold Trust on Tuesday. The holdings of the SPDR gold ETF are at 739.065 tonnes and at 165.58 tonnes in the Gold Trust.
With U.S. confidence levels in the economy dropping and home ownership at 25-year lows, the question is, “Is the U.S. economy losing traction?” With most now believing that interest rates will not rise before September, should data continue to disappoint then the rises will be pushed out even further. Any fall off in growth will have long-term implications.
Gold is entering what many believe are the summer ‘Doldrums’ but the fundamentals for gold are improving. Continued dollar weakness is proving positive in U.S. investor’s eyes for gold. Asian demand for gold is set to continue to grow internally and westward.
Over the past decade, gold demand globally has increased nearly 50%, while Asia’s gold demand has soared around 250% during the same period, so far. Song Yuqin, deputy general manager of the Shanghai Gold Exchange has pointed out that in the next few years, China, India, Thailand and other emerging economies in Asia will see growing demand for gold as China develops the Silk Road Economic Belt and the 21st Century Maritime Silk Road.
China’s gold production and consumption jumped in the first quarter despite the negative views on gold in the developed world. China produced 110.7 tons of gold in the period, a 14.72% rise over last year. Last year, China’s gold production stood at 451.8 tonnes the world’s largest national production. None of this gold leaves the country to enter the London or New York markets.