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Will this week see clear direction for gold and silver?

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The New York gold price closed Monday at $1,089.10 the same as Friday. In Asia on Monday, it was held at the same level as it was in London until it was set by the LBMA at $1,087.00 down from $1,090.45 with the dollar index higher at 99.21 up from 99.03 on Monday. The euro was down at $1.0867 from $1.0891 against the dollar. The gold price in the euro was set at €1,000.28 down from €1,001.24. Ahead of New York’s opening, the gold price was trading at $1,087.45 and in the euro at €1,000.69.  

The silver price in New York closed at $14.00 up 10 cents at Monday’s close.  Ahead of New York’s opening on Monday, the silver price stood at $14.03.

Price Drivers

The gold price has held at the same level this week barely moving either way. This behavior normally precedes a strong move either way. At the same time currency markets have also quietened down. The oil price has held at the $28 level despite fears that it would plunge to $25.

We are seeing a broad acceptance that in 2016 currencies will be volatile, particularly those in the emerging world. Again, we repeat this is not tied to economic performance but to solely financial/ currency/ debt factors. It is the slowing of global growth that is making the monetary world more vulnerable.

Many feel that the 6.9% GDP growth in China is better than expected and also feel that China’s demand will help the rest of the world avoid further value collapses. We note that China is developing its economy to be able to do what the rest of the world does, as well and cheaper. So to the contrary, over time, the development of China will cost the developed world dearly, as it outperforms the developed world.

The IMF has cut its global growth target from 3.6% to 3.4% pointing to recession in Brazil, falling oil prices and a too strong dollar. Last year the global economy is estimated to have grown 3.1% the worst performance since 2009. U.S. growth will fall to 2.6% down from 2.8% in the I.M.F.’s last estimate.

Monday saw no purchases or sales from either the SPDR gold ETF or the Gold Trust. The holdings of the SPDR gold ETF are now at 657.924 tonnes and at 161.46 tonnes in the Gold Trust.  This is consistent with an immobile gold price. The gold market is waiting for the delicate balance of gold demand and supply on COMEX [not the rest of the world which remains unconnected with the U.S. gold market] to be disturbed.

The silver price has decided that gold is about to rise and jumped from below $14 to its current level. Hopefully this week will see a clear direction given for silver and for gold.

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

UPDATED: Latest Gold Reserve figures from the World Gold Council

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A computer glitch had recorded the % of reserves for all countries at 18.8%.  This has now been corrected.

The World Gold Council (WGC) has today announced its regular statistical update on gold reserves in the official sector.  This monthly release includes (1) World Official Gold Holdings ranking gold holdings by country, (2) a spreadsheet with the latest changes in official sector gold holdings.  As noted these are not completely up to date – except for the Chinese reserve figure where we have added in the 19.8 tonne change in our table.  We are also only showing the Top 20 national plus IMF holdings in our table below – a full table for all countries as reported to the IMF is available on the WGC website (www.gold.org/statistics ).

Table 1.  Top 20 Gold Reserves as reported to the IMF

Tonnes % of reserves**
1 United States 8,133.5 73.4%
2 Germany 3,381.0 67.7%
3 IMF 2,814.0
4 Italy 2,451.8 65.6%
5 France 2,435.5 65.6%
6 China 1,722.5 1.8%
7 Russia 1,370.6 13.6%
8 Switzerland 1,040.0 6.4%
9 Japan 765.2 2.3%
10 Netherlands 612.5 56.5%
11 India 557.7 5.8%
12 ECB 504.8 25.8%
13 Turkey 500.9 15.3%
14 Taiwan 423.6 3.5%
15 Portugal 382.5 72.9%
16 Venezuela 361.0 67.4%
17 Saudi Arabia 322.9 1.8%
18 United Kingdom 310.3 8.6%
19 Lebanon 286.8 20.9%
20 Spain 281.6 18.8%

* This table was updated in December 2015 and reports data available at that time.  Data are taken from the International Monetary Fund’s International Financial Statistics (IFS), December 2015 edition, and other sources where applicable. IFS data are two months in arrears, so holdings are as of October 2015 for most countries, September 2015 or earlier for late reporters

What analysts primarily look out for are for any month by month changes in the official holdings figures.  As can be seen below the only significant regular additions to gold reserves in the second half of the year are By Russia (95.6 tonnes in the four months to end October), China (83.9 tonnes in the five months to end November) and Kazakhstan (11.7 tonnes in the 4 months to end-October).  Our assumption is that going forward we would expect these countries, which seem intent on building their gold reserves, will continue to buy at a similar pace.  For the record. According to the IMF figures Kazakhstan is 23rd on the list of national gold holders with 216.3 tonnes which accounts for 27.8% of its total official reserves.

The IMF figures should be taken as a guide as they relate to holdings as reported by the various countries and do not take account of gold holdings which may be temporarily reduced due to gold swaps and leasing (as the countries do not need to report these figures under the IMF guidance), or countries which may be under-reporting their gold holdings as many believe China to be.

Table 2  Changes to official reserves since July*

Country Comments Jul Aug Sept Oct Nov Dec
Belarus Purchases and swaps +2.5  -3.0  -2.5
Brunei Darussalam +0.2  -0.3
China +19.0 +16.2 +14.9 +14.0 +19.8
Colombia  -6.6  -0.3
Czech Republic  -0.2
France +0.1
Jordan +7.5  -0.6
Kazakhstan Purchases and swaps +2.5 +2.1 +3.2 +2.9
Malaysia +0.6
Mexico Additions to reserves and trading  -0.1  -0.2  -0.2  -0.1
Mongolia Trading activity +1.0  -0.9  -0.6  -0.2
Mozambique +0.6  -0.9
Philippines Buys locally produced gold; may sell or retain in reserves +0.1
Russia Mainly purchases of gold in the domestic market & other changes +13.1 +29.6 +34.5 +18.4
Serbia +0.1 +0.1
Sri Lanka Trading activity  -0.2
Turkey3 +17.2 +0.6  -13.2  -3.6
Ukraine +2.2 +0.9 +0.3
United Arab Emirates +2.4 +0.1 +0.1
Uruguay  -0.2
 

*As in Table 1, IFS data are two months in arrears, so holdings are as of October 2015 for most countries, September 2015 or earlier for late reporters.  We have added in China’s latest Reserve upgrade for November.

3Gold has been added to Turkey’s balance sheet as a result of the policy accepting gold in its reserve requirements from commercial banks

 

 

Today an important day for gold and silver prices

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The New York gold price closed at $1,063.20 up from $1,052.70 a rise $10.50 on Thursday.  In Asia prices were pulled back to $1,061.85 as the dollar weakened from 100.19 on the dollar index to 97.88. The dollar is at $1.0938 down from $1.0586 against the euro. The London a.m. price was set at $1,063.00.  In the euro the fixing was €975.68 down from Thursday’s €995.17 because of the stronger euro.  Ahead of New York’s opening the gold price was trading at $1,061.70 and in the euro at €974.53.  

The silver price in New York closed at $14.11 up 8 cents on Thursday’s close. Ahead of New York’s opening the silver price stood at $14.16.

Price Drivers

The moves by the E.C.B. underwhelmed the market and the dollar fell back heavily against the euro. It was expected that the euro would fall to $1.03 but instead it has risen to $1.0938.  If the gold/euro relationship holds anywhere around here, we should see a further rise in gold towards the critical $1,080 level. This is subject to what the Fed does today. The shorts got a shock and may well have started to close positions, or are waiting for the Fed today before they do. They may precipitate the rally.

We have written about how critical the $: € is to both the E.U. and the U.S. looking to see just how they will ‘manage’ the exchange rate. From what we saw yesterday there appears to be agreement that the $+1.07 level is the point that the two agree is the line in the sand. If this is true the actions of the Fed today will confirm this. If so, this applies to gold and silver too, going forward.

We do expect a rate rise, but it could be less than the expected 0.25%? If so, we have no doubt that the E.C.B. accepted that their actions must not strengthen the dollar or weaken the euro against the dollar. This would add fact to the thought that the dollar’s ‘bull’ market, at least against the euro, is over? Hence today is an important day for the gold and silver prices! Ahead of New York’s opening the markets were virtually frozen waiting for the Fed’s announcement.

After massive sales of 15.776 tonnes of gold from the SPDR gold ETF we saw a tiny sale of 0.226 of a tonne and a sale of 0.9 of a tonne from the Gold Trust, yesterday. The holdings of the two gold ETFs, the SPDR gold ETF and the Gold Trust remain at 638.797 tonnes in the SPDR gold ETF and at 157.07 in the Gold Trust. These investors remain in a holding pattern waiting for the Fed too.

The silver price remains over $14.00 and should move with gold after the Fed’s announcement today.

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

Waiting on the IMF’s SDR vote

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The New York gold price closed at $1,058.60 on Friday.  In Asia prices were pulled back to $1,056 as the dollar went stronger again this morning, taking the dollar to 100.23 up from 100.08 on the dollar index. The LBMA price setting fixed it at $1,055.65 down from $1,064.65 on Friday’s LBMA price setting. The dollar is at $1.0580 up from $1.0590 against the euro.  In the euro the fixing was €998.44 down from Friday’s €1,005.43.  Ahead of New York’s opening the gold price was trading at $1,056.15 and in the euro at €999.01.  Later it moved up to the low $1,060s

The silver price in New York closed at $14.10 on Friday. Ahead of New York’s opening the silver price stood at $14.12.

Price Drivers

The Technical picture on the gold price continues to point lower. We would have thought the fall would have been faster, but it seems that the lack of physical sales is now affecting the pace of the fall. The fundamentals have become irrelevant for 50% of gold mines are now unprofitable with the industry looking at a five year life for its mines, at the pace that gold is being produced now.

But gold is moving with currencies as money, rising in falling currencies and falling in the dollar. After a sales of 0.893 of a tonne from the SPDR gold ETF but none from the Gold Trust, the holdings of the two gold ETFs, the SPDR gold ETF and the Gold Trust remain at 654.799 tonnes in the SPDR gold ETF and at 159.52 in the Gold Trust.

The big news of the day will be the vote by the I.M.F. as to whether the Yuan will join the basket of currencies that make up the SDR. While it is a symbolic move, it will trigger an adjustment in central bank foreign exchange holdings with the Yuan coming in against while that amount of dollars and euros being removed. Its acceptance as a ‘well used’ currency by the IMF will make it far more acceptable for international deals to be funded in Yuan, again at the expense of the dollar and the euro.

But most importantly is signifies a change in the monetary system’s structure. While the other currencies are ‘allies’ of each other China is not seen as an ally, thereby opening the likelihood of a divided and multi-currency system. With the U.S.A. holding the controlling vote in the I.M.F. we will wait to see if they accept the situation. It appears they can hardly refuse to do that, but let’s see first.

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

 

Gold price in a high risk area

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New York closed at $1,117.70 down $16.60 on Tuesday. In Asia it rose to $1,120.00 before London opened. The LBMA price setting fixed it at $1,118.00 down from $1,130.90 yesterday. The dollar Index was stronger yesterday and rose to 97.36 at the close of New York up from 96.86 yesterday. The dollar was slightly stronger at $1.0931 up from $1.1017 up against the euro.  In the euro the fixing was €1,023.25 down from €1,029.789.  At New York’s opening gold was trading in the euro at €1,023.19 and at $1,118.30.  

The silver price closed at $15.29 down 14 cents over Tuesday’s close. At New York’s opening, silver was trading at $15.27.

Price Drivers

Technically, the gold price has broken down through support and yet in Asia it lifted again. The Technicals are not yet clear enough to point a way forward for the gold price. We are in a high risk area now. It could either rally strongly or plunge.

Tuesday saw sales from the SPDR gold ETF of 2.978 tonnes making over 10 tonnes sold this week and a further 0.70 of a tonne sold from the Gold Trust leaving their holdings at 686.304 tonnes and at 160.30 in the gold Trust.

These sales were not sufficient to cause such a large fall in the gold price so we must ask why such a fall? We know that exporters of gold to China do not chase prices but accept gold that is offered to them. This means they have little impact on prices allowing prices to fall increasing supply. This increases the influence of speculators and dealers on COMEX on the gold price, which is solely reflective of U.S. opinion on gold prices with little physical gold movement. The result is a distorted market causing prices to behave as they are now. It is not in the interests of Asian buyers to change this scene as they are maximizing physical supply at bargain prices.  

Today the I.M.F. discusses the inclusion of the Chinese Yuan in the currencies that make up the Special Drawing Right. It is a day on which China has placed great importance. Since discussions began, China has complied with the wishes of the U.S. controlled I.M.F. in publishing gold reserves on a monthly basis and keeping the Yuan exchange rate steady against the dollar. This would change if the IMF rejected the Yuan in that role. We expect that a Yuan Gold Fixing will follow soon thereafter, on the Shanghai Gold Exchange.

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

Russian central bank accumulates another 34.2 tonnes of gold

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Russia continues to amass more gold in its reserves with the purchase of another 34.2 tonnes in September, bringing its total to around 1,353 tonnes – or around 13% of its total foreign exchange reserve figure.  This is Russia’s second highest monthly total purchase in six years and represents yet another indicator of its continuing desire to downplay the significance of the U.S. dollar holding in its overall forex reserve make-up.

This is the seventh successive month that Russia has increased its gold reserve – it didn’t add to reserves in January or February.  It thus remains the world’s sixth largest national holder of gold, moving further ahead of Switzerland in seventh place which is sitting on 1,040 tonnes and closing the official gap with China which also reported increasing its gold reserve in September by 15 tonnes to 1,708 tonnes, although this only represents well under 2% of its massive forex reserves of around $3.5 trillion. Many reckon though that gold held in Chinese government accounts amounts to a far higher total than officially reported being amassed in accounts which it does not classify as part of its forex holdings and thus does not report to the IMF.

Top 10 World national holders of gold in forex reserves
Country Gold holdings
(in tonnes)*		 Gold’s share of
forex reserves
1 USA 8,133.5 72.6%
2 Germany 3,381.0 66.8%
3 Italy 2,451.8 64.9%
4 France 2,435.4 65.2%
5 China 1,677.4 1.6%
6 Russia 1,288.2 12.7%
7 Switzerland 1,040.0 6.1%
8 Japan 765.2 2.2%
9 Netherlands 612.5 56.3%
10 India 557.7 5.5%

Sources:  IMF, Wikipedia, Sharelynx, LawrieOnGold

However transparency in the reporting of global gold holdings can be obscure – even for those like China and Russia which are reporting month by month official changes.  Most of the gold holders in the table above as the central banks of the countries concerned do not allow audits of their gold holdings and many have reported zero change for a number of years.  In particular, as Wikipedia points out, gold leasing by central banks could place into doubt their reported gold holdings.

GLD purchase halts gold price slide

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New York closed Wednesday with the gold price at $1,116.00 down $11.40 from $1,127.40. With China closed for the next week the gold price held at New York’s close overnight. The dollar was a little stronger at €1.1175 this morning in London and the dollar index a little higher at 96.27. In London’s morning the LBMA gold price was set at $1,114.20 down from $1,122.50. In the euro this was €998.48 down from €1,001.16.  Ahead of New York’s opening gold was trading at $1,113.10 and in the euro at €997.58.  

The silver price closed at $14.54 down 10 cents over Wednesday in New York. Ahead of New York’s opening, silver was trading at $14.52.

Price Drivers

With China closed for the next week, the market price of gold could easily be distorted by traders in New York. However, the gold ETF SPDR in the U.S. saw a healthy purchase of 3.276 tonnes and a purchase of 0.36 of a tonne into the Gold Trust yesterday, but this was insufficient to lift the gold price, but certainly halted its fall.  This leaves the holdings of the SPDR gold ETF at 687.417 tonnes and 160.65 tonnes in the Gold Trust. The trading range of the gold price is at the bottom end of support at $1,114. We may see a strong move shortly, either way.

The IMF and the World Trade Organization has issued another warning on the global economic front. They see global economic growth falling from current levels. This may well place additional pressures on emerging nation’s exchange rates and interest rates in addition to the pressures already on large corporates across the world. It is only a matter of time before banks pull the plug on some of these. So be ready for more bouts of global, financial market volatility.

We pointed to the possibility of a series of financial markets falls yesterday, similar to 2008. Then the gold price fell from $1,200 to below $1,000, before turning around and soaring to a record $1,921. At that time the U.S. was very long of gold, which was sold off to cover margin calls and provide liquidity to cover shortages. Some believe that we will see the same again soon. The difference between then and now is that the U.S. holdings of gold were not rebuilt after the massive sell-off in April 2013. Since then on balance their holdings have fallen lower. The implication is that gold should not have a very heavy sell-off as we saw in 2008, despite U.S. investors search for sources of easily liquidatable holdings. The subsequent turning to gold may happen much quicker. Before that, we should see markets very volatile.

Silver is back in sync with the gold price and should continue to stay so today.

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

 

Official: IMF extends composition of current SDR basket for 9 months.

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In an announcement today, the IMF Executive Board has confirmed the previously suggested extension of the current SDR basket of currencies by nine months from December 31 this year up until September 30th next.  This leaves the way open for changes to be made, and implemented, in the structure of the SDR basket for a revised basket (if so chosen) to be implemented in October 2016.

The proposal for the extension was put forward by IMF staff in a paper published on August 4, 2015 (see Review of the Method of Valuation of the SDR – Initial Considerations) and subsequently submitted to the Executive Board for lapse-of-time decision.

Normally the IMF would review, and restructure if it chooses to do so, the SDR basket every five years which would have made this process due to be announced in October this year, and implemented at the beginning of next.  However the extension is undoubtedly due to internal arguments over the inclusion of the Chinese renminbi and the delay gives the Chinese time to meet some of the requirements of key IMF board members (the USA?)  which have almost certainly already led to China’s recent renminbi devaluation against the U.S. dollar.  This may at least give it the appearance of no longer being tied directly to the greenback with which it had been in lockstep for a number of years.  Whether China will allow a full float of the renminbi on the global currency markets remains to be seen – this may be a step too far, and perhaps also an over-worrying move if implemented for some IMF board members (the USA again?)

The official statement from the IMF says that the ‘nine-month extension is intended to facilitate the continued smooth functioning of SDR-related operations and responds to feedback from SDR users on the desirability of avoiding changes in the basket at the end of the calendar year. The extension would also allow users sufficient lead time to adjust in the event that a decision were to be taken to add a new currency to the SDR basket.’ (The italics are ours – with the only currency likely being considered for inclusion being the Chinese renminbi, and with the country’s now global top GDP status as confirmed by the IMF, it would presumably form a major – if not the major – currency in the SDR basket.)

The inclusion of the renminbi in the SDR basket may be seen by many as downgrading the status of the U.S. dollar in global trade and even possibly as the leading global reserve currency with all the advantages that brings.  However any such change in status may take some years to take effect.

Doom and gloom for gold overdone? – Are there positives ahead?

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Seldom has the media been more bearish on gold’s prospects, and this will undoubtedly present itself in a further retreat from gold derivatives and gold stocks.

China seems to be being fingered for the latest gold price crash, but should it be?  A truly Machiavellian argument might be that the crash was perpetrated by those elements seen as anti-gold seeking to gain maximum advantage at a time when gold was already under pressure. And by undertaking some of the activity on the Shanghai markets seeking either to try and apportion the blame to Chinese hedge funds, but also to dampen the appetites of the gold purchasing Chinese people and institutions who may be seen as standing in the way of a major manipulated gold price downturn.

What is the evidence here?  The gold price crash was actually initiated in New York with an enormous futures sale – which then continued in Shanghai with a reported double whammy of a large 5 tonnes of physical gold being sold into the Shanghai Gold Exchange and another massive futures trade on the Shanghai Futures Exchange.  As the U.K.’s Ambrose Evans Pritchard puts it, writing in the Daily Telegraph – “Spot prices slumped by more than 4 percent to $1,086 an ounce in overnight trading after anonymous funds sold 57 tonnes of gold in Shanghai and New York, choosing the moment of minimum market liquidity in what appears to have been a synchronized strike intended to smash confidence.”

Indeed the initial COMEX futures sales, conducted at around 11.29 pm on Sunday night when activity on the exchanges would be at around their lowest, was so great that it forced two 20 second automatic trading halts because of the volumes – virtually unprecedented.  The chart below from Reuters shows the activity as noted by Bron Suchecki of the Perth Mint in his analysis of what took place.  The red circled initial drop was over a period of precisely 4 seconds!    If anyone tells you the gold price can’t be manipulated  here is an almost perfect counter argument.  The two green stars are when the automatic trading halts took place.

gcq5ann

The recent Chinese announcement of a far lower than expected increase in its gold reserves after a six year denial of any increase (although few believe the Chinese figure), coupled with a U.S. Fed interest raising start date now expected to be in September had already weakened the gold price and with what seems to have been a concerted anti-gold media campaign in most Western mainstream media, seldom will gold investors been on the end of a more gloomy array of prognostications.

Yet, when sentiment is as low as it is at present this often represents the turning point.  Readers of my articles on Mineweb may recall one of May last year entitled Gold to fall to $1,100 then skyrocket – silver, platinum in behind.  In it we discusses a prediction by Elliott Wave analyst, Peter Goodburn on a scenario as suggested in the title of the article – and indeed gold has now, as he then suggested, fallen to the $1100 mark, although perhaps a year behind the timing his initial premise may have suggested – but these things are always difficult to time accurately.  Now we shall see if gold does indeed recover from this level, and if it does, on the Goodburn projections the reversal in fortunes could be both rapid and very large indeed.  We shall see.  Personally I’m not a great believer in such chart analysis but have to recognise that the chartists are often, but not always, right in their predictions.

Goodburn’s company, WaveTrack International has thus put out a note today reminding clients of the prediction in a note entitled Gold Bullion – Time to be a Contrarian .  We will have to wait and see if this is indeed a good predictor of the gold price, but if it is we shouldn’t have long to wait.

Another possibly bullish point for gold is the IMF’s pending announcement – probably in October – of any revision in the make up of its Special Drawing Rights (SDR), which is broadly regarded as an indicator of global reserve currencies.  If, as many expect, the Chinese yuan is to be included, it would have to be at least close to pari passu with the US dollar which could, over time, lead to a major reduction in the dollar’s current role as the world’s principal reserve currency and be a major game-changer in the dollar’s global influence.  And with China, and the countries seen as already in its zone of influence (like India, Russia, Brazil and South Africa) seen as pro-gold nations this could well herald a significant change in sentiment for the yellow metal.

So could gold have reached its low point with the only way now upwards?  Its not beyond the bounds of possibility.  The recent move to drive the price down noted above has been so blatant that maybe some kind of counter reaction will be set in place.  Perhaps by China which has already demonstrated its capability of halting a stock market collapse in its tracks in the interests of stabilising its economy.  With so many of its citizens holding gold could it be prepared to do the same here, particularly if it feels the blame for the latest price collapse has unfairly been attributed to its financial elements?

Greek bailout deal unworkable – IMF

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New York closed yesterday at $1,145.10 down $4.20 with Asia and London holding it there in line with the moves in the dollar against the euro. The dollar was stronger at $1.089 up from $1.0934 against the euro with the dollar Index at 97.54 up from 97.27.  The LBMA gold price was set this morning at $1,143.00 down $2.10 again, in reaction to the rising dollar. The euro equivalent was €1,049.39 down €1.69. Ahead of New York’s opening, gold was trading in London at $1,144.30 and in the euro at €1,050.54.

The silver price fell to $15.01 down 10 cents in New York. Ahead of New York’s opening it was trading at $15.00, again.

The gold market continues to see thin trade but yesterday saw the emergence of buyers from Asia as prices in the Rupee in particular began to hit recent lows. But the gold price was shifted in line with the moves in the dollar. In the euro it remained above €1,050. Short positions are still at extremely high levels on COMEX.

We are sorry to say that our expectation that the fat lady had at last sung in the Greek tragedy is now far from correct. The IMF had stated emphatically that the deal is unworkable. The IMF cannot lend to an insolvent state. Germany has stated emphatically that Greece cannot have a ‘debt haircut’ under the rules of the E.U. nor can it have a ‘back door haircut’ by extending the debt out for a generation and with mini-interest rates.  The ECB has given funds to rescue Greece for a short while and stated emphatically that Greece’s place in the Eurozone was ‘never in question’ and that ‘debt relief is ‘uncontroversial’. This horse won’t run!

The next month should see a lot of fur flying and a Grexit is not off the table. This raises questions about the euro exchange rate, which is dominating the gold price unreasonably so. The divisions in the Troika are very deep and may take some heavy backing down for them to be resolved. For sure the deal agreed earlier this week is not a done deal.

Let’s see what Germany says today. All the world’s eyes are turning back to Greece for the next month if not years. So the gold sold into the market in the belief that the issue was resolved may well find its way back into investor’s hands? We are in important territory for gold from a Technical point of view!

As of the end of June 2015, China’s official gold reserves were 53.32 million ounces (1,658.48 tonnes), the People’s Bank of China announced today. This is an increase of only 604 tonnes since the last time the central bank updated its figures in 2009.

There were sales of 1.772 tonnes from the SPDR gold ETF and purchases of 0.36 tonnes into the Gold Trust leaving the holdings of the SPDR gold ETF at 707.878 tonnes and 167.76 tonnes in the Gold Trust.

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

China middle class growth to add to record gold buying levels there

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New York closed yesterday at $1,155.20 down $2.70 with Asia and London holding it there. The dollar was weaker at $1.1011 down from $1.0992 against the euro with the dollar Index at 96.66 down from 96.94 before London opened.  The LBMA gold price was set this morning at $1,154.75 up $1.55. The euro equivalent was €1,047.53 up €2.02. Ahead of New York’s opening, gold was trading in London at $1,155.00 and in the euro at €1,047.90.

The silver price fell to $15.38 down 12 cents in New York. Ahead of New York’s opening it was trading at $15.33.

The gold market is seeing thin trade with few buyers or sellers, allowing the gold price to be nudged around by currency moves. Since the 8th July the holdings of the SPDR gold ETF have moved from 709.65 tonnes and at 167.40 tonnes in the Gold Trust to 709.071 and to 167.76 tonnes in the Gold Trust. This continues to show that the U.S. investor is not interested in gold at present. All the action in gold is occurring below the surface of the price and in Asia, primarily China.

The news that China is doing better than expected, achieving over 10% growth on their retail side and 8.4% on the services side, points to a fast growth rate in their middle classes. It is this group that will add to the current record levels of buying of gold into China. These numbers directly impact gold demand.

While the Greece tragedy, we feel, is no longer impacting the euro exchange rate, the report from the IMF that Greek debt is unsustainable with it reaching 200% of GDP within 2 years really does make a real tragedy of the current deal, which sad to say the Greek Parliament looks like accepting. While it may be politically acceptable to give a “grace period” [postponing repayments and interest?] for 30 to 40 years, according to the IMF, all this does is to emasculate Greek sovereignty and allow the creditors that time to write-off the debt. The country is bankrupt and this deal makes sure it stays that way for more than the next generation. Keeping such a weak link in the E.U. does achieve the objective that it will keep the euro weak for the foreseeable future and maybe longer. Overall this will be positive for the gold price in euros. The entire exercise has weakened the credibility of the Eurozone. For weak nations to use the euro, which reflects far greater strength than their economies deserve, is a fundamental mistake for them.

Silver will likely recover faster than gold now.

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

Chinese middle classes’ faith in gold being restored

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Julian Phillips’  take on the drivers of the gold market ahead of the major US holiday.

New York closed at $1,165.60 down $2.90. Asia and London took it back up to $1,169.50. The dollar was 0.60 of a cent weaker at $1.1054 and the dollar Index was lower at 95.93 down from 96.37.  The LBMA gold price was set this morning at $1,168.25 up $3.95. The euro equivalent was €1,052.67 up €1.67 Ahead of New York’s opening, gold was trading in London at $1,168.60 and in the euro at €1,053.03.

The silver price fell to $15.65 up 6 cent in New York. Ahead of New York’s opening it was trading at $15.67.

Unbelievably the I.M.F. has put its foot in it! The report just issued clarifies that Greece needs to be given 40 yrs to repay its debt and needs lower interest rates and for a portion at least of its debt to be written off if it is to return to growth. Even then it will still have debt to GDP of 150%. For those Greeks who understand this, a No! vote to the past offer from the E.U. seems necessary to get the better deal one like that of the IMF’. So the story still has a long way to go. Nevertheless, the markets may react to the vote if a No! rules the day.

What is of greater importance to the gold and silver price is the behavior of the Chinese equity markets. After the hype that money may be finding its way from gold into the equity markets, that money is leaving the market in droves. The Chinese have always been gamblers and seem to have changed the equity market into a casino. The new rich middle classes are seeing a reinforcement of their faith in gold in a year that may see imports of gold higher than in 2013, their record year. As Chinese middle classes grow continuously, a good portion of their savings [and the Chinese are great savers] finds its way into gold. At some point, that demand will reach a level where it does spill over directly into London and New York and impacts the current low prices.

In India where the monsoons are now generous, there remains two months before their ‘gold seasons’ begin again.

Meanwhile, the gold price is bumping along on the bottom at the mercy of U.S. dealers and speculators. Yesterday the data on employment and on jobs was disappointing so they stepped back, at which point the gold price rose slightly.

On Thursday there were sales of 1.789 tonnes  of gold from the SPDR gold ETF and 0.39 of a tonne from the Gold Trust.  The holdings of the SPDR gold ETF are at 709.65 tonnes and at 167.40 tonnes in the Gold Trust.

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

 

Greece won’t default, but just be ‘in arrears’: Big inflow into GLD

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Julian Phillips’ latest take on factors driving the gold markets globally and on the latest political ‘fudge’ over Greek debt

New York closed yesterday at $1,173.10 down $1.30. Asia took it up $2 and London held it there. The dollar was weaker at $1.1217 up from $1.170 and the dollar Index was lower at 95.10 down from 95.44.  The gold price was set this morning at $1,174.40 down only 20 cents. The euro equivalent was €1,047 96 down €3.61. Ahead of New York’s opening, gold was trading in London at $1,174.10 and in the euro at €1,048.40.

The silver price fell to $15.87 down 3 cents in New York. Ahead of New York’s opening it was trading at $15.83.

It now appears that if Greece misses next week’s payment to the I.M.F. they will not have defaulted, but only be “in arrears”, a state allowed by the I.M.F. With no progress in these negotiations and with little evidence of Greece’s ability to pay the due amounts, the structure of the negotiations needs to change. That can only happen if Greece ‘defaults’. Then creditors have to face a reality that they now they have as much of a structural crisis as Greece does. So don’t expect a last minute solution. Rather expect more drama next week. But nothing is certain these days.

Meanwhile, the interest rate differentials between the E.U. and U.S. continue to place upward pressure on the dollar. In the last week, the foreign exchange markets have been loath to respond to this pressure holding the $: € exchange rate around $1.12: €1 through the week. We do see pressure rising and should we be correct in our expectations on Greece, we expect volatility to leap, in foreign exchanges and in global financial markets, next week.

Over in Asia, the picture continues subdued, as is normal for this time of the year. In India, generous rains have kick-started the growing season with farmers being buyers of gold from, at the latest, September onwards.

Chinese demand is robust with premiums over London’s gold price rising with annual demand projected to be higher than the record breaking 2013. There is no reason why this should not happen. Some felt that the Chinese would turn to their equity markets instead of to gold. The average Chinese investor is unlikely to turn away from his traditional love of gold. We note that China experienced hyperinflation in the past and the old generation remembers it well. With the government encouraging investment in gold and the Chinese people responding obediently to the government, gold is unlikely to be abandoned as a bedrock investment. This is why Asian demand will continue to underpin demand for gold.

The U.S. investor in gold has come to life. There were purchases of 7.753 tonnes of gold into the SPDR but none into the Gold Trust on Thursday. The holdings of the SPDR gold ETF (GLD) are at 713.228 tonnes and at 167.79 tonnes in the Gold Trust. This is the first time this year we have seen such a large purchase! Will there be follow through?

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

 

Greece back into the gold equation

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Julian Phillips’ latest insights into what’s driving the gold and silver markets

New York closed Thursday at $1,181.50 down $4.70.  Today sees the dollar stronger at $1.1189 up from $1.1271 nearly a cent stronger against the euro with the dollar index stronger at 95.40 up from 95.03. The LBMA Gold Price was set at $1,179.25 down $1.25 with the equivalent euro price at €1,053.98 up €6.18. Ahead of New York’s opening, gold was trading in London at $1,181.10 and in the euro at €1,055.26.

The silver price rose slightly to $16.04 up 1 cent in New York. Ahead of New York’s opening it was trading at $15.95.

With the currencies continuing to react to the political situation in the E.U. gold is very steady as these currencies react to gold. In other words, currencies are moving against gold while gold continues to move sideways in London and New York. To make a move either way in significant terms will take an event, such as the departure of Greece from the Eurozone.

And today’s news of the day is, once again, Greece, as the IMF walks out of a meeting with Greece stating ‘serious differences’ with the Greek government. Statements that a ‘deal’ was imminent should be ignored from now on. The impression given by the actions of the IMF is that there will be no agreement before a default then Greece will have to settle its much reduced debt via classic Exchange Control regulations on a take it or leave it basis.

Essentially Greece is trying to gain an agreement with creditors on the basis that it is outside the E.U. already. A bankrupt Greece [there are no insolvency courts for nations] has a stronger hand than one begging for relief. As we have said many times before, Greece is already ruined as a debtor no matter what happens. It has nothing to lose by reneging on the debt. Remove that debt and Greece has a surplus. With a Drachma, it may be able to repeat what Iceland has done over the last few years [Iceland is now healthy financially]. History shows that a financially ostracized nation can recover.

On the other hand, the E.U. cannot accede to Greece’s demand or they will have to offer the same to other E.U. weaklings. So a ‘Grexit’ appears, right now, inevitable!

What we find surprising is that the euro appears to be rising on the expectation of a settlement and falling on expectations of a default. The loss of Greece‘s debt is a tiny matter for the overall E.U. so will not damage its financial standing. But the loss of such a weak nation from the E.U. will lead to a stronger euro, so the reverse should be happening.

There were no sales or purchases of gold from the SPDR gold ETF. The holdings of the SPDR gold ETF are at 704.225 tonnes and at 167.01 tonnes in the Gold Trust.

Silver is ready to be more volatile once gold starts moving. Regards,

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

Gold price set by US but buying is in Asia and elsewhere

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My latest article on Mineweb looks at  the hugely anomalous situation whereby the gold price is effectively set by the U.S. market, but gold demand is virtually all elsewhere – primarily in Asia where, of course, China and India dominate.  The price currently fluctuates around U.S. economic data and whether this is likely to lead to the Fed raising interest rates sooner rather than later, but where the gold is being bought whether U.S. interest rates may rise a quarter of a basis point in June, September or whenever is a total irrelevance.

China in particular is well aware of this and is making moves to have more control over gold price setting itself, and it is interesting also that many of its recent initiatives – the latest being the setting up of the $16 billion Silk Road gold fund – involve gold.  China certainly sees gold as playing an increasing role in global finance and trade, and here it is aligned with Russia which has been adding to its own gold reserves on a regular basis.  It is widely believed that China is doing so too, but without reporting the additions to the IMF until it deems it politically expedient to do so.

China also feels that the U.S. in particular is trying to sideline it economically, as the former is worried about the latter’s potential impact on the U.S.’s hitherto dominant position in world trade through the dollar’s use as the world’s reserve currency.  China want the yuan to have a much greater role – and if it sees this as being blocked by the U.S. it sets up parallel institutions to rival the U.S. dominated ones – the Asian Infrastructure Investment Bank is a prime example which could grow to rival the World bank and the IMF.  There is also a belief that China may be preparing to set up a rival to the IMF’s super currency – the SDR – if it blocked from becoming part of this currency basket again this year.

Interesting times in the global financial sector.#

To read the Mineweb article click on: Gold: The U.S. sets the price but Asia does the buying

Greece defers IMF payments while gold suffers

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By Julian Phillips

New York closed at $1,177.00 down $16.40 against Wednesday’s close as there were very thin volumes being traded. Today sees the dollar slightly firmer at $1.1226 down from $1.1126 against the euro with the dollar index weaker at 95.67. The LBMA Gold Price was set at $1,175.90 down $11.10 and the equivalent euro price was €1,047.11 down €14.72. Ahead of New York’s opening, gold was trading in London at $1,173.20 and in the euro at €1,044.84.

The silver price rose slightly to $16.18 down 61 cents in New York. Ahead of New York’s opening it was trading at $16.16.

Thin trading was the main feature of the day in London and New York. In such an environment prices become extremely volatile and can move both ways quickly often reversing just as quickly. Volatility is paramount. The currency moves were sidelined as gold and silver fell in all currencies. The fall seems frightening as support at $1,180 has been breached. But readers should note that in such thin trading the Technical indicators may not be as reliable as they should be.  In such markets, one would be foolish to go firm on a future direction for silver and gold in the short term.

The main feature of the day for gold remains Greece as it postponed the repayment of €300 million until the end of June along with other payments due before then. This adds tremendous leverage to the ‘horse trading’ between the E.U. and Greece.  Despite reassurances that a deal was ‘close’ this move tells us that the situation is quite different. Now we wait still more, realizing that unless the E.U. agrees to the terms of Greece, they will hold a general election or referendum for permission to leave the E.U. and euro. Any funds they do have for repayment will not be repaid. With a default then a reality, we expect the Greek government to issue its own schedule of repayments.  We believe that unless the E.U. backs down there will be no agreement and the euro should go stronger as the main weak link in the E.U. is done away with. But then, expect great currency volatility across a group of currencies.

In the past two days we have not seen sales from either the SPDR Gold ETF or the Gold Trust. The holdings of the SPDR gold ETF are at 709.891 tonnes and at 166.71 tonnes in the Gold Trust.  We remain in ‘no widows or orphans’ territory. So, one may well ask what made prices fall so far? Dealers can and do protect themselves from sellers by marking prices down. The reverse is also true when dealers want to protect themselves from buyers by marking prices up too. This combined with small sales will trigger such behavior.

Silver remains riveted to gold in good times and bad and will continue to do so. We do, however expect the silver price to show even more volatility than the currently volatile gold price in thin markets.

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