Gold’s notable strength in the Euro

Julian Phillips’ latest gold and silver market commentary.

New York closed yesterday at $1,198.80 up $15 with Asia lifting it just over $1,200. The Fix saw the gold price set at $1,199.25 up $12.75 and in the euro, at €986.550 up €10.007 while the euro was barely changed at $1.2156. Ahead of New York’s opening today gold was trading in London at $1,197.80 and in the euro at €985.56.

New York saw short positions closed yesterday with the gold price rising to $1,206 at one point, before settling back to consolidate at $1,200 once more.

There were sales of 1.494 tonnes from the SPDR gold ETF but no change in the Gold Trust yesterday, but this did nothing to slow the recovery of the gold price over $1,200.  The holdings of the SPDR gold ETF are at 710.808 and at 161.73 tonnes in the Gold Trust.

We expect trading ranges to narrow today, the last day of 2014, as we move forward to the point where the gold and silver prices make strong moves into the New Year. What is of note is the strength of gold in the euro at €985.

We expect 2015 to be the first of the next few years of consequences.   We may well see a Fixing or similar established in Shanghai as that market matures and becomes the center of gold trading, overtaking but partnering with London in a 24-hour gold market. It will likely, also be a year when arbitrageurs between the two centers will smooth out the premiums between east and west giving us  a global price all the time.

Just a word on yesterday’s commentary, where we said that, “New York is losing its influence over the gold price.” While New York and London have highly developed markets where traders can move prices around very quickly and make them react in the short-term to most pieces of news, the physical demand for gold has risen to the point where marginal supplies of gold are also being absorbed by the east. This is making it difficult for traders to move physical gold in sufficient amounts to move prices. The physical amounts of gold available for trading the gold price have dropped dramatically in the last two years leaving physical demand from the east reaching in to take most of that stock as well. Consequently, just as oversupply in the oil market has crushed the influence of marginal supplies to dominate prices, so ‘over-demand’ is doing the same in the gold market.

Some will retort that COMEX dominates gold prices due the huge volumes traded there. We again point out that COMEX trades paper and is essentially a financial market and only trades around 5% of its contracts in physical gold that will be delivered.  COMEX traders need to trigger real physical sales or purchases to back up their ‘paper’ transactions to move gold prices. If there are no deliveries of gold on COMEX there can be no impact of COMEX on the gold price. 95%+ of gold contracts on COMEX are closed out before a physical delivery of gold happens.

The silver price is as quick to recover as it is to fall.

 

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

 

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Gold out of the picture in U.S. investor view, but perhaps not for long.

Yesterday’s action in the gold and silver markets

By Julian Phillips

Yesterday saw New York dominate the gold price, again in thin holiday trading, as we wait for the New Year to come in. The price was pulled down quickly to $1,180 as traders acted on the Technicals. There were barely any sales or purchases from or to the gold ETFs. The holdings of the SPDR gold ETF are at 712.302 and at 161.73 tonnes in the Gold Trust.

The euro has resumed its fall and is now tackling the lower $1.21 area and looking weak. With 10-yr Treasuries offering 2.2% and leading nations in the Eurozone offering substantially less than 1%, yield seeking money is flowing stateside. The U.S. balance of payments is looking good supporting a stronger dollar. The only factor against a stronger dollar is that the Treasury does not want to see it. Can the U.S. resist pressure from outside?

We also expect the Chinese monetary authorities to weaken the Yuan if the dollar strengthens more. At 6.22 Yuan to the dollar it is off its high by 2%. They too do not want a stronger Yuan!

As we end 2014 the U.S. market mood is that equities will go higher, bonds will remain on low yields and gold is out of their picture. Outside of the U.S. where the vast bulk of gold demand exists, gold is in persistent strong demand, the U.S. influence over the gold price is at a long-term low level and expectations of huge volatility in all global financial markets are widespread.

We expect the current U.S. financial euphoria will not last as long as they think and gold will do far better than most think too!

The silver price remains very volatile while following the gold price’s direction all the way.  For the silver price to lessen its volatility, it needs to see the gold price give a clear direction. We see this happening somewhere north of $1,200 an ounce. At that point, we expect to see more professional investors come in and less two-way trading in silver.

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