Italian referendum : Gold confounds – again

Here’s a lightly edited version of my thoughts on gold’s contrary reaction to the result of the recent Italian referendum which led to the resignation of Italian Prime Minister Matteo Renzi.  Article was published on SharpsPixley.com (I publish articles on Sharps Pixley as I generate a small amount of income whereas I have not tried to commercialise lawrieongold which comes to you free of charge.)

I suppose we should have expected it after the Brexit vote and the Donald Trump US Presidential vote result, but yet again a plebiscite, whose result would normally have been expected to give a significant boost to the gold price appears to have had the opposite effect.  This time it was the Italian referendum which saw a significant defeat for would-be reformist Prime Minister, Matteo Renzi, and his as-promised subsequent resignation.  True, as with the Trump and Brexit votes, once it became apparent which way the results would go, the gold price spiked upwards, but then it was brought down sharply as global markets opened giving further fuel to the conspiracy theorists claims that the financial and governmental elite is working in concert to suppress the global gold price. (Ed Steer who picked the article up in his own newsletter calls it conspiracy fact! – for details on his service click on edsteergoldandsilver.com )

The problem for gold is that strength in the yellow metal’s price is generally seen as recognition that the global economy is indeed in a parlous state and neither the big money, nor the politicians, want to see this interpretation gain public credence.  For the former it would mean a market collapse, perhaps of epic proportions, destroying wealth, and for the latter it would damage the carefully orchestrated perceptions that all is well with the global economy, despite plenty of indicators that this is not the case – not least the debt mountains which have been built by many of the world’s major economies.

Modern day politics is all about perception.  If people can be led to believe that all is well they will continue spending at levels that will indeed help the economy.  In the U.S. for example there is plenty of evidence from non-massaged statistics, that the average person is worse off than they were a few years ago – in some cases substantially so.  Yet we have just seen a consumer spending splurge on Cyber Monday which has broken all records.  This is obviously unsustainable, but how long will it be when this perception that all is well with the world is just a myth is understood by the majority of the general public?

In part the Italian, US and UK votes  highlighted above may also signify that this comfortable existence may indeed be on the way out, albeit perhaps just the beginning of such perception.  All three are being seen as votes against the establishment, but in no case has the majority been large enough to carry much more than 50% of the vote (less in the case of the Trump victory) so there is still a very substantial number of people out there apparently still happy with the status quo.  The ‘protest vote’ will have to grow much further if we are to see any serious perception change.

Part of the underperformance of gold against expectation after the Italian result has been put down to dollar strength, given a sharp fall in the euro as the result was confirmed  which is seen as having the potential to upset the euro applecart and precipitate an Italian  banking system meltdown with a correspondingly adverse impact on the whole European banking sector to which the Italian banks are severely in debt.  But the resultant dollar strength has been shortlived, while gold has remained well down on its Friday close – despite Shanghai trying to give it a boost with a pm gold benchmark price, as calculated by kitco.com, of $1,198.11 – over $20 higher than the Globex spot price at the time.

Advertisements

Britain reaping the whirlwind of Remain campaign ‘project fear’ rhetoric

Post the Brexit vote, the pound sterling is down around 8-9% from the kind of level it was at for most of the couple of weeks before the vote, while there seems to remain a distinct element of pending gloom in much of the economic commentary and the general opinions of the more economically aware in the country’s financial centre.

Should this be so?  The more representative market index – the FTSE 250, which includes many smaller companies not represented in the most quoted FTSE 100 Index of the top 100 London Stock Exchange companies – is actually higher than it was in mid-June (just) but commentators only seem to mention the immediate post-Brexit vote fall of around 13.6% , and ignore the fact that it had peaked ahead of the referendum in anticipation of a Remain vote, and has since recovered a good part of the lost ground.  Year to date the FTSE 250 is down 6% – but is running 6% higher than at its low point in mid-February – hardly a stock market meltdown as many had been predicting.  Indeed if one looks at the larger companies which comprise the FTSE 100 index this is actually 3% HIGHER than its mini peak on June 23rd when Remain appeared the most likely referendum result.  This certainly doesn’t seem to represent a particularly downbeat outlook by the market professionals.

Gold of course has risen in the dollar, and obviously rather more so in the pound, which is a positive for those who took our advice and bought some gold, or gold derivatives, ahead of the referendum as insurance against a possible Brexit vote.  Again we had not ruled out a result for the vote to leave the EU ahead of the referendum vote contrary to the opinions of most of the media, politicians and economists.  We had recognised the big underswell of anti-EU feeling in the country which did not seem to be being picked up by the opinion polls.

But even the performance of those elements which have come back quite sharply like the pound could probably be at least partly blamed on the tenor of the Remain campaign which was preaching huge negativity should the vote be to leave.  Some would say Remain campaigners are thus being proved correct, but could this just be that they had imbued such a negative opinion in the minds of the sector of the populace which voted to Remain in the EU that we are now reaping the consequences of such a ‘project fear’ campaign?

Interestingly though some of the European stock markets have fared far worse than the UK ones.  Germany’s DAX Index for example is down 5.6% on the year, the French CAC down 6.4%.  Spanish and Italian indexes fell even more.  One wonders where the Brexit vote is impacting most – it doesn’t seem to be the UK?

It is notable that there is already a degree of backtracking on the likely adverse effects of the Brexit vote by the politicians of all hues who are now desperately trying to see positives in the result however much they may, at heart, disbelieve them.  There should, for example, be much comfort in that the financial markets actually on balance seem to be positive rather than negative.  This could suggest that the pound may be oversold too, although it is showing little sign of recovery so far and is still slipping back against the dollar and the euro.  In this context it should be noted that Britain imports a far greater value of goods from EU nations – Germany in particular – than it exports to them, and while much was made by the Remain campaign of the possibility of UK exports to the EU being cut off in the case of a parting of the ways, the imposition of trade barriers would seem likely to have a greater impact on the EU than on Britain itself.  One suspects that self-interest will predominate here and reciprocal trading relations will be largely uninterrupted even if official trade deals may be slow in being negotiated.

The lower value of the pound could also boost consequentially less-costly UK exports globally, although would make imports more expensive.  It could also work against that other threat of multinational organisations moving manufacturing plants out of the UK as the resultant lower cost of goods by remaining might more than balance the possibility of the imposition of tariff barriers inside the EU – if indeed this were to occur.

While the prospect of Brexit would not be ‘a storm in a teacup’ as some optimists and Leave campaigners might suggest, it may well not be nearly as disastrous for the UK economy as the Remain camp was saying only 10 days ago.  But the belief in their rhetoric is in itself having an adverse effect on sentiment and may continue to do so for some weeks and months.  This will likely settle down as politicians change their tune on the fait accompli of the Brexit vote with more positive statements certain to flow from those who only a week or so ago were preaching doom and gloom.  While the UK economy may be in for a difficult several months it may not be nearly so badly affected once things are seen in the cool light of day as the anti-Brexit commentary inevitably dies down.

Will lower growth weaken the dollar (and boost gold)?

The New York gold price closed Thursday at $1,114.50 down from $1.125.80 down $11.30. In Asia on Thursday, it lifted it to $1,115.55 ahead of London’s opening and then the LBMA set it at $1,112.90 down from $1,119.00 with the dollar index up at 99.08 up from 98.85 Thursday. The euro was up at $1.0918 up slightly from $1.0910 against the dollar. The gold price in the euro was set at €1,019.33 down from €1,025.66. Ahead of New York’s opening, the gold price was trading at $1,115.90 and in the euro at €1,022.07.  

The silver price in New York closed at $14.24 down 24 cents at Thursday’s close.  Ahead of New York’s opening, the silver price stood at $14.25.

Price Drivers

Wednesday saw no purchases or sales to or from the SPDR gold ETF but a purchase of 1.40 tonnes into the Gold Trust. The holdings of the SPDR gold ETF are now at 669.229 tonnes and at 166.45 tonnes in the Gold Trust. We expect the gold price try to climb in consolidation mode, today.

Today sees a slew of data from the U.S. GDP to the E.U. inflation rate. For gold and silver investors the importance of these lies in their impact on the exchange rates of the dollar and the euro. We constantly get bombarded with new statistics trying to give us the impression that all is well in the developed world but certain realities come through.

Today, so far we have seen Japan desperately attempting to engineer inflation to 2% using negative interest rates to do so. We see this type of inflation damaging the credibility of the Yen, already no longer a ‘safe haven’ because of the treatment it has received to date. The euro likewise is under attack with hints at more stimuli on the way.

It seems unfashionable to say this but central banks can only influence monetary policy and not engineer growth. This is the job of government using fiscal resources and structural reform as well as doing what they can to assist the consumer on the ground with improvements to his job security, value of his house and putting some disposable income in his pocket. At the moment it is only Saudi Arabia that is doing that for consumers all over the world.

But with U.S. economic growth declining in 2015 today may see economic growth drop to below 1% from nearly 4% at the start of last year. What happened to the recovery and the efforts  to boost it since 2008?

Will lower growth weaken the dollar? With the other globally leading currencies trying their best to fall, against what will the dollar fall? If so, this is gold positive.

Silver Silver should find a solid base today.

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

Gold and silver price rise could be meteoric if Fed decision prompts buying

The New York gold price closed at $1,064.10 down from $1,078.20 on Monday.  In Asia prices dropped to $1,062.60 before London took it down to $1,067 as the dollar index weakened to 97.38 against yesterday’s 97.85 on the dollar Index. The euro is at $1.1031 up from Monday’s $1.0955 against the dollar but later fell back to $1.0962. The London a.m. LBMA gold price was set at $1,069.15 up from Monday’s $1,068.00.  In the euro the fixing was €972.44 4.05 up from yesterday’s $9724.05. Ahead of New York’s opening, the gold price was trading at $1,063.05 and in the euro at €966.94.  

The silver price in New York closed at $13.71 down 24 cents. Ahead of New York’s opening the silver price stood at $13.72.

Price Drivers

While gold and silver prices are being forced down the euro is trying to rise strongly. The foreign exchange market clearly has a different view of the Fed’s actions tomorrow than dealers and speculators on COMEX. The price falls appear to be a ‘marking down’ of prices before potential selling can take place. If buying comes in instead the speed with which prices rebound will be meteoric.

We note that there have been no sales or purchases from or to the gold ETFs in the U.S. The holdings of the two gold ETFs, the SPDR gold ETF and the Gold Trust remain at 634.63 tonnes in the SPDR gold ETF and at 156.32 tonnes down from 157.07 tonnes in the Gold Trust.

The Technical picture continues to point downwards but the market is cautious and just about ready for tomorrow’s action. What action? The above picture can change in a heartbeat as it is not based on moves in physical gold. The silver and gold markets are therefore in a high risk situation that could move fast after the Fed’s announcement.

The foreign exchange market is reading a weaker dollar not the stronger one that a rate increase would suggest. With the euro now going stronger this implies a market disappointment in the Fed’s move tomorrow, much as we saw after the announcement from the E.C.B.

We do suggest that tomorrow is no place for those with sensitive nerves. In this type of market, at least in the very short term, the tone is more like a casino. The direction given from the Fed will be clearly seen in the gold and silver markets. It may be hard to get in either way quickly, but each one must consider his risk tolerance and accept making a move after the horses have left the starting gate to lower his or her risks.  We have our own views taking all available information into account and will advise our own to follow that route.

The silver market has become high risk for the next day and more.

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

Gold acting as a currency in global parity wars

The New York gold price closed at $1,072.70 down from $1,074.60 on yesterday’s close.  In Asia prices drifted slightly higher to $1,073.25 as the dollar weakened to 97.67 down from 98.40 on the dollar Index. The euro is at $1.0975 up from $1.0935 yesterday against the dollar. The London a.m. LBMA gold price was set at $1,072.00 down from $1,078.40, on Wednesday.  In the euro the fixing was €979.00 down from yesterday’s $986.55. Ahead of New York’s opening, the gold price was trading at $1,075.30 and in the euro at €981.74.  

The silver price in New York closed at $14.15 down 1 cent. Ahead of New York’s opening the silver price stood at $14.22.

PRICE Drivers

While the gold and silver prices are following the euro, today should see a small rise in the gold price as the euro reaches $1.10 but no fireworks should be expected as markets wait for Monday’s Fed announcement.  Fridays are usually the busiest time of the week for gold and silver prices, but with all waiting for the Fed, we may find that this Friday is very quiet. Many assumptions will be made about the Fed’s next moves and some speculators may well take positions ahead of their move. This promises to give all financial markets across the world a volatile week.

Once again, we saw no sales from the SPDR gold ETF and nothing from the Gold Trust, on Wednesday. The holdings of the two gold ETFs, the SPDR gold ETF and the Gold Trust remain at 634.63 tonnes in the SPDR gold ETF and at 157.07 in the Gold Trust.

Again we look forward to 2016 and look at the path of global currencies and gold. As this week has clearly shown gold is moving as a currency against different ones. So, where in 2016+? What we will say is that the interplay of exchange rates now has a direct impact on each country’s trade position in the global picture. While the G-20 may have agreed that they would not manipulate their exchange rates to gain a competitive advantage this has been happening on a broad front since then. But where were the start line and the finish lines for this agreement?

We see some central banks blatantly managing rates and using measures designed for their economies internally directly affecting their exchange rates. What a nearly 50-year journey from fixed exchange rates, to re- and de-valuations of different ones, to ‘floating’ rates to manipulated rates. What next? We note that countries don’t have friends, they have interests. If the journey continues, it is inevitable the gold will take a measure of value role in a multi-currency monetary system.

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

2016 to be ‘troubled’ with volatility, turbulence and uncertainty. How long can gold stay depressed?

The New York gold price closed at $1,074.60 up $1.70 from $1,072.90.  In Asia prices drifted higher to $1,075 as the dollar weakened slightly to 98.40 down from 98.58 on the dollar Index. The euro is at $1.0935 up from $1.0856 yesterday against the dollar. The London a.m. LBMA gold price was set at $1,078.40, up from $1,071.75 seen Tuesday.  In the euro the fixing was €986.55 down from yesterday’s $986.79. Ahead of New York’s opening, the gold price was trading at $1,078.45 and in the euro at €987.73.  

The silver price in New York closed at $14.16 down 12 cents. Ahead of New York’s opening the silver price stood at $14.27.

Price Drivers

The gold and silver prices are following the euro, as we forecast and should continue to do so through the rest of this week until the Fed does what it is going to do. We believe that they will have a surprise in store for us!

Consistent with the waiting game the markets have adopted this week, we saw no sales from the SPDR gold ETF and nothing from the Gold Trust, on Tuesday. The holdings of the two gold ETFs, the SPDR gold ETF and the Gold Trust remain at 634.63 tonnes in the SPDR gold ETF and at 157.07 in the Gold Trust.

What is of growing concern across the world is the slowing global economy. This exposes vulnerable economies, sectors and industries to ‘financial accidents’ in 2016.  Yes, it is most clearly expressed in the commodity sector, where we saw Anglo American’s plans to cut the workforce from 135,000 to 50,000 in the near future. Such a massive shrinking is not because of short term factors but to a long-term scenario in commodities.

At current gold prices Mark Bristow of Randgold Resources tells us that the gold mining industry now has a life of five years as they move to higher grades and shorter lives.  While this tells us that production has increased it cannot last for long before we see more closures and huge layoffs. Mergers and acquisitions will fuel that process.

It is time to begin looking forward to 2016. At first glance we see 2016 to be a ‘troubled’ year with volatility, turbulence and uncertainty reaching new heights. How long the gold & silver markets can continue down in such a scene is impossible to say. Why? Because the gold price does not reflect the physical gold markets. It reflects currencies and will therefore reflect the currency crises we expect to see then. The shift of wealth to the east will impact on western financial markets and the precious metal markets, as gloom shows signs of becoming doom. We may well see the start of that story when the Fed makes its play next week.

The silver price remains strong over $14.00 and should hold here over the week

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

Gold and silver market morning: Monetary changes will be huge over next few years

New York closed at $1,145.80 down from $1,156.80 at the close on Thursday but then rose to $1,150 in Asia overnight. The LBMA price setting fixed it at $1,147.75 down from $1,159.00. The dollar Index has risen and now stands at 97.11 down from 97.37. The dollar was weakening this morning as London opened, trading against the euro at $1.0993 down from $1.0931. In the euro the fixing was €1,041.75 down from €1,156.52.

At New York’s opening gold was trading in the euro at €1,041.35 and at $1,147.20 but was then marked down further. The silver price closed at $15.60 down 39 cents on Thursday. At New York’s opening, silver was trading at $15.57.

PRICE DRIVERS

Yesterday saw support damaged with gold falling through that level. The Technicals are now giving an opaque picture. The downside risk appears limited unless gold falls through $1,130.

In the euro the gold price rose to €1,046 ahead of London’s opening so the moves in the gold price remain reflective of currency movements.

The gold price was not even reflecting U.S. demand and supply or the global picture and or traders and speculators, or demand and supply influences. We believe that the dealers adjusting gold prices, to reflect currency moves, remains the dominant influence on the gold price, going forward.

There has been no action in either the SPDR gold ETF or the Gold Trust. The holdings of the SPDR gold ETF are at 694.344 tonnes and 161.99 tonnes in the Gold Trust. This, to us, is confirmation of dealer dominance over the gold price.

The pre-opening fall now we feel are dealers bracing themselves for any sales, not actual physical sales. We have discussed this at length in our newsletter, detailing how this change is structural for the gold price.

While the gold market is struggling to rise the changes on the monetary front are going to be huge and will affect the entire global monetary system over the next couple of years. This stems from the action in exchange rates that we are watching today!

With U.S. GDP growth falling back to 1.5% but consumer spending rising to 3.2% in the third quarter the U.S. economic picture can be read either way. Japan too is giving an uncertain outlook as inflation targets are postponed. The Eurozone’s growth is weakening as is China’s. Overall the global economy is not giving a hopeful picture.

Silver prices will reflect $ gold price moves because the silver price is almost entirely a U.S. dollar price and is not moving with other currencies

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

Greek deal seen as negative for gold and Euro

Julian Phillips’ take on the apparent Greek-EU deal and its likely effects on the market.

New York closed Friday at $1,163.00 up $0.60 with Asia and London taking it down this morning to $1,160. The dollar was weaker at $1,1147 down from $1.1140 against the euro with the dollar Index at 9587 down from 96.11.  The LBMA gold price was set this morning at $1,154.95 down $7.45. The euro equivalent was €1,043 13 down €4.86. Ahead of New York’s opening, gold was trading in London at $1,156.80 and in the euro at €1,044.66.

The silver price rose to $15.58 up 12 cents in New York. Ahead of New York’s opening it was trading at $15.48.

The week has started with a deal between Greece and the E.U. after a frantic weekend. For gold and silver investors the details of the deal are irrelevant. It means that Greece will not exit the euro or Eurozone and so there is no threat to either, anymore. The market is reading this as a negative for the gold and the euro. But this was the initial reaction in London. The market may be in turmoil as they settle down now. Is this the end of the threat to the euro and E.U. of Greece’s departure? We think so. But it certainly isn’t the end of the Greek drama/tragedy.

The agreement means that the attention of the monetary world will revert to the E.C.B.’s quantitative easing and the desire of the E.C.B. to see a lower euro exchange rate with the dollar. We expect that if the euro does not weaken it will be because the U.S. Treasury does not want to see a stronger dollar than it is already, but may have to, as a rate hike may now be closer, after Greece.

There appears to be an imminent deal between Iran and the U.S. so the media has led us to believe. If this does happen, then the markets should pull down the oil price strongly and keep it there for a long time and will be very bad news for “Fracking” oil production. This will be a positive for the global economy having a similar impact to a tax break. But will this feed down into the economy of the world? Overall it should.

To get a balanced perspective on all of the above for gold and silver, we remind readers that these issues have an influence on speculative activity not on gold and silver’s fundamentals. However, with speculative activity having a major impact on prices until the entry of Chinese banks and an arrival of a Yuan “Fix”, when gold and silver prices are headed towards a major shift from speculative dominance, to an Asian, more fundamentally oriented pricing than we have seen for several years.        Julian D.W. Phillips for the Gold & Silver Forecasters – www.goldforecaster.com and www.silverforecaster.com

 

Speculators try to drive gold down as Euro weakens

Julian Phillips sees the clashing of the US and Chinese tectonic plates re currencies ahead.  What will be the impact on gold?

New York closed Wednesday at $1,210.20 down $15.10 over Tuesday’s close. Asia took it up a dollar this morning and London held it there. The LBMA Gold price was set at $1,209.60 down $10.05 over Wednesday’s level. The euro equivalent stood at €1,089.12 down €3.70 while the dollar was stronger and the euro weaker at $1.1142 down from $1.1198 against the euro. Ahead of New York’s opening, gold was trading lower in London at $1,209.50 and in the euro at €1,085.92.

The silver price closed at $17.12 down a large 56 cents over Tuesday’s level. Ahead of New York’s opening it was trading at $17.17.

Yesterday saw sales of 2.983 tonnes of gold from the SPDR Gold ETF, after no sales on Tuesday when the gold price fell so hard.  No movement has been seen in the Gold Trust for the last two days. The holdings of the SPDR gold ETF are at 715.260 tonnes and at 166.14 tonnes in the Gold Trust.  These sales are the same amount as we have seen from time to time in the last month and indicate that it is a trader who is trying to follow the Technical picture.

The gold market continues to move because of currency issues. For instance, yesterday saw speculators once again try to drive gold down as the euro weakened and succeeded. In doing so, they hoped that the fall through the 100 and 200 day moving averages would trigger stop loss selling, but the fall halted yesterday and then turned up slightly. We have been seeing similar pressures on gold today.  Asian demand does not like it when prices move higher too fast and stand back until bottoms are tested, so ignoring the Technical picture, they will come in close to $1,200 as usual. In New York, it is becoming clear that the Technical picture is not working as it has in the past when chart patterns dictated future moves.

The dollar index is stronger at 95.35 up from Tuesday’s level of 94.88. The euro is stabilizing today at $1.1135 but has fallen from Tuesday’s $1.1190. ‘Brutal’ falls seen on Tuesday after the ECB said that they will increase QE in months when liquidity is low in holiday months make central banks unhappy, so the path to $1 on the euro will be extended in a smooth manner, but we still expect it to happen as Draghi wants. It is unlikely that the U.S. will condone this as they are visibly suffering on the export front.  But what can they do? Will gold walk its own road then?

Often we think that governments and central banks just react to situations including on the financial front. Governments are full of intelligent well educated people who are constantly looking ahead and planning for potential situations. They are rarely caught by surprise. We are sure they have mapped out the future path of the dollar and its role in global finance.

Likewise, so have the Chinese. The two think differently from different viewpoints with different objectives. The Chinese want to quietly move into a strong global position with the Yuan and the dollar wishes to remain all powerful. The question we need answers to, concern the extent of the disturbance that will happen as events unfold. Will these two ‘tectonic plates’ of influence smooth transformation or will there be earthquakes and financial tsunamis. The first answers will come in the next ten days, and gold?

Please note, the Chinese have embraced gold!

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

Will we see a Greek tragedy start to unfold today?

As Greece’s make-or-break neogotiations with the EC come to a peak, Julian Phillips ponders on the outcome of the talks and its potential effects on the Euro

While there is only a week before the Chinese New Year on the 19th February, demand in China is not being allowed to feed through to London or New York as we mentioned yesterday, while traders and speculators move prices around on the back of euro prospects. As gold supplies have fed through to Asia, steadily and persistently at levels that are outrunning newly mined and scrap gold supplies, Asian demand is encouraged by current low prices and likely to increase. But we do expect Chinese demand to lessen in the next week as the holiday begins.

There is an almost surreal atmosphere on financial markets in Europe as they await the outcome of today’s meeting to discuss Greece’s demand to lessen the debt burden of Greece. They are facing a wall of opposition from the other member states. Greece has committed itself to getting better terms. We are in no doubt that the new government has extrapolated the possible reactions of the E.U. members and know precisely what steps they will take in each scenario. In true negotiating style the chest beating has to precede the meeting.

Looking at the eventualities, we do see the Eurozone losing more than Greece if the Greeks exit from the E.U. simply through a rapidly strengthening euro on foreign exchanges. The E.U. cannot afford that. A weak euro is the blessing Greece brings to the Eurozone. Posturing over debt obligations and the commitments of the previous Greek government will, we expect, bring considerable financial market tension and ensure a Greek exit. It is a choice for Greece to simply fail to pay the debt it can’t afford to and depart with ignominy or to fail in its challenge to the E.U. then, leave the E.U. with bravado, ahead of the default. Let’s see if we see a Greek tragedy or not?

Gold and silver markets today

Meanwhile on the precious metals markets, gold in New York closed yesterday at $1,234.00 down $6.70. In Asia the gold price lifted to $1,238. London took it down and it was Fixed at $1,235.50 down $2.00 and in the euro, at €1,092.396 down €4.387, while the euro slightly stronger at $1.1310. Ahead of New York’s opening gold was trading in London at $1,234.00 and in the euro at €1,091.41.

The silver price closed at $16.91 down 12 cents. Ahead of New York’s opening it was trading at $16.92.

There were no purchases or sales from or into the SPDR gold ETF or the Gold Trust on Tuesday, once again, despite the slippage in gold prices. The holdings of the SPDR gold ETF are at 773.305 and at 167.75 tonnes in the Gold Trust.


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

Updated: Interesting times: Putin plays gas card, SNB cuts Euro link, gold surges

Lawrence Williams
Two reports on Thursday combined to drive the gold price significantly higher as early 2015 geopolitical events accumulate.  Latest article now up on Mineweb.com – Click here to read this article and many others on Mineweb
Lawrence Williams
A supposed ancient Chinese curse, almost certainly apocryphal*, which has been doing the rounds for many years is “May you live in interesting times.” These are interesting times indeed as a confluence of geopolitical events threatens to drive the gold price ever higher. Apart from the seemingly ever ongoing Russia/Ukraine disputes, which may, or may not, involve the Russian military, and ISIL’s apparent expansion of action from Syria and Iraq, where it controls vast swathes of territory, into Afghanistan (interestingly bringing it into conflict with the Taliban) a couple of reported events today suggest the scary start to the year is continuing with a potentially very positive effect on Safe Haven demand for gold. Add substantial nervousness in the general stock markets after a steady rise over the past few years and you have a recipe for a take-off in the gold price perhaps foreseen by the Elliott Wave analysts we’ve reported on in these pages in the past.
See: Elliott Wave analyst sees big gold and silver price surge ahead

Reports on Thursday suggest that Russia may have cut off much, if not all, of its flows of natural gas through the Ukraine, thereby effectively halting supplies to a number of European nations which depend on it for a significant proportion of their domestic power. Ostensibly the cutoff is reported to be because Russia is accusing Ukraine of siphoning off supplies of gas moving via the pipeline through its territories without paying for them, but the political motives may be much stronger – or this could perhaps just be a warning shot across the bows to the EU not to extend economic sanctions – or even to drop them and the taps could be turned on again after a short ‘warning burst’ of supply disruption.

There is some doubt about the accuracy of the above report, but there is little or no doubt about the veracity of Russia’s staed longer term policy in bypassing the Ukrainian pipeline system in favour of a pipeline through Turkey.  Russia thus says that longer term it will be re-routing the bulk of its supplies to Europe via a pipeline running through Turkey, and thence to Greece and then it is up to the European nations to organise how supplies are transmitted onwards from there.

According to a statement by Gazprom CEO Alexey Miller, quoted in Russian news agency Tass, the Turkish Stream gas pipeline project is to be in the future the only route for Russia’s future supplies of 63 billion cubic metres of natural gas to Europe that is currently delivered via Ukraine. (The Turkish route is the proposed replacement for the South Stream pipeline project across the Black Sea to Bulgaria which has now been cancelled).  Miller’s statement has since been confirmed as accurate by EU Commissioner for Energy Maros Sefkovic, who has been in discussions with Miller over the matter and describes the decision as making no economic sense – as if many of the geopolitical events today make any economic sense!

Miller went on to say further that Gazprom has notified its European partners about its Turkish Stream gas pipe plans and now their task is to create the necessary gas transport infrastructure from the border of Turkey and Greece Tass reports. “They have a maximum of several years for this. This is a very tight schedule. To comply with it, work for the construction of new trunk gas pipelines should be started in EU countries right now. Otherwise, these gas volumes may be redirected to other markets.” (see Gazprom to use Turkish route to substitute Europe-bound supply of 63 bcm via Ukraine)

With Russian natural gas providing around 25% of EU energy, and the greater proportion of this flowing through the Ukraine pipeline system, this is potentially very serious for the economies (already reeling) of a number of European nations which rely to an even greater extent on Russian gas supplies. Further the reports today that Russia has turned off the Ukraine pipeline altogether suggest a further escalation which the EU is ill-prepared to cope with.
A second event today is that the Swiss National Bank (SNB) has been forced to sever the Swiss Franc’s direct link to the Euro which had seen the nation’s currency fall even more heavily against the US dollar than it is obviously prepared to live with. The SNB statement said it is discontinuing its minimum exchange rate of 1.2 Swiss Francs to the Euro, where it has been pegged since September 2011. It is also moving interest rates into even more negative territory to help try and counter resultant Swiss Franc strength against other currencies. Even so trade saw the Swiss Franc appreciate quickly against the US dollar by as much as 15%! The gold price shot up too in U.S. dollars – and even more in the Euro – at one time reaching $1260, although it had fallen back to the lower $1250s at the time of writing – still a big increase on the overnight level.

So where do we go from here? The confluence of disturbing geopolitical events continues – and we’re only two weeks into the New Year. Short covering should be coming in as traders digest the events and the gold price pattern which could drive prices even higher still. As we said at the start – Interesting Times!

*The Wikipedia comment on the ‘Chinese curse’ is as follows: “May you live in interesting times” is an English expression purporting to be a translation of a traditional Chinese curse. Despite being so common in English as to be known as “the Chinese curse”, the saying is apocryphal and no actual Chinese source has ever been produced. The nearest related Chinese expression is (níng wéi tàipíng quǎn, mò zuò luànshì rén) which conveys the sense that it is “better to live as a dog in an era of peace than a man in times of war.”

Gold – Down in Dollar, up in Euro in Year of Consequences

Julian Phillips’ commentary on the latest action in the gold and silver markets.

New York closed yesterday at $1,212.30 down $6.60 as the euro continued to fall. In Asia the gold price slipped to $1,207.90 with the euro at $1.1807 ahead of London’s opening. The Fix saw the gold price set at $1,206.50 down $7.25 and in the euro, at €1,025.064 up €1.234 while the euro was another 0.85 of a cent weaker than yesterday at $1.1770. Ahead of New York’s opening gold was trading in London at $1,206.60 and in the euro at €1,024.80.

The silver price closed at $16.54 up 1 cent. Ahead of New York’s opening it was trading at $16.37.
There were sales of 2.988 of gold from the SPDR gold ETF, the same as yesterday and purchases of 2.39 tonnes into the Gold Trust yesterday. The holdings of the SPDR gold ETF are at 704.833 and at 162.29 tonnes in the Gold Trust. This was a large purchase into the Gold Trust whereas the sale from the SPDR gold ETF appears to be from the same seller as yesterday, due to the shape of the sale. This is the first time we have seen such a contradiction between the two gold ETFs. In view of the changing trend in the gold price we would expect this sort of market contradiction.

It’s official, the Eurozone has moved into deflation with a drop in the inflation rate to -0.2%. While the E.C.B. is going to pursue quantitative easing, we doubt that it will be successful in stimulating growth. Until governments make the needed reforms and support Draghi and the E.C.B. structural problems in the Eurozone will continue. This requires action by politicians. Unfortunately, politicians are not keen to solve problems, but are keen to solve crises as this route gains votes. So we will have to wait for a full blown crisis before we see a change in the Eurozone.

The euro continues to tumble and so will oil prices. With the euro now at $1.1775 the fall is now brutal which is what Draghi wants. Will it reach $1.10? Unless we see central banks on both sides of the Atlantic intervene in the exchange rate soon, we will reach that level soon.
2015 is already proving a different world to 2014! The year has already seen two dramatic price shocks in the euro and in the oil price. We believe there are many more shocks to come this year, the year of consequences.

With the dollar index over 92, we expect to see the rate of climb slow according to the Technical picture, but with its interest rates set to climb and already so much higher than the Eurozone, will it? The rise in the gold price both in the dollar and against commodities has surprised many as perceived links to gold are proving not to be so, particularly the rise of gold alongside the dollar. But we expect this to continue.

The silver price is trying to follow gold but as gold is showing such strength appears poised to perform stronger than gold. The days ahead may show this.

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

Gold breaks through Dollar and Euro resistance

Julian Phillips’ market commentary on gold and silver for Jan 6th.

New York closed yesterday at $1,205.50 up $18.00 as the gold price broke through key resistance in the dollar and in the euro. Gold continued to rise in Asia to $1,209.7 and in London to over $1,212 ahead of London’s Fix. The Fix saw the gold price set at $1,211 up $19.00 and in the euro, at €1,017.305 up €18.495 while the euro was another 0.3 of a cent weaker at $1.1904. Ahead of New York’s opening gold was trading in London at $1,211.80 and in the euro at €1,018.49.

The silver price closed at $16.20 in New York up 41 cents. Ahead of New York’s opening it was trading at $16.31.

There were purchases of 1.648 tonnes of gold into the SPDR gold ETF and sales of 0.03 tonnes from the Gold Trust yesterday. The holdings of the SPDR gold ETF are at 710.808 and at 161.15 tonnes in the Gold Trust.

Yesterday was an important day for gold as resistance was broken in the euro and strength is now indicated in the dollar price of gold. This makes today just as important as yesterday, as any price rises in either currency reflects the changing mood of markets globally and a positive indicator for gold.

With the year ending on a positive note for global financial markets, yesterday saw the mood turn down, as markets fell across the world alongside the oil price. The oil price is hitting new lows making the prospect of $35 a barrel of oil a distinct prospect, as oil producers raise production to compensate for lost revenue, exacerbating the situation in the oil market.

The euro is currently standing at $1.1904 and looks like falling lower. Emerging markets are showing the greatest signs of stress as prices fall there. While the oil price falls are direct stimuli to the global economy, these are part of the computations for economic growth measurement. In this case such statistics distort what is happening as they treat lower oil prices as deflationary, not as they really are, growth factors.

What is becoming clear to investors is the reality that central bank and government’s ability to promote true growth is very limited as we have seen in the last 8 years.  For precious metals what is important is the reality that any confidence in the future is tempered by the visibly high degree of uncertainty, volatility and a dash of prudence, that will prove positive for gold and silver.

The silver price is now back on track and moving up with gold. As on the fall it exaggerates the downside, so on the rise it will also exaggerate the upside.

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

 

 

Gold is far more than just a precious metal

Gold is far more than just a precious metal

Julian Phillips’ looks at today’s early market action and looks for further falls in the Euro against the dollar.  Will the Swiss National Bank intervene to follow the euro down?

New York closed Friday at $1,187.50 up $4.90 as the world goes back to business as usual and volumes rise on Chinese demand. Gold rose in Asia to $1,196.00 ahead of London’s opening. The AM Fix saw the gold price set at $1,192 up $7.50 and in the euro, at €998.81 up €15.46 while the euro was another cent weaker at $1.1934. Ahead of New York’s opening gold was trading in London at $1,188.60 and in the euro at €998.53.

The silver price was at $15.79 up 10 cents. Ahead of New York’s opening it was trading at $15.90.

There were no sales or purchases from or to the SPDR gold ETF or Gold Trust on Friday. The quiet holiday period appears to be out of the way now and Asia came in solidly.

Will further falls in the oil price affect gold and silver? Will Russia bring in Capital Controls as it watches the Ruble fall or are we looking at a different world than in the past? Are the rules governing exchange rates changing for good? Will the slowdown in China hurt the gold price? These are questions that will be answered in 2015 by the realities that will confront us. We continue to believe that gold is far more than just a precious metal, it is a metal that reflects so much of the perceptions of the financial world. 2015/16 will demonstrate this well. We will cover these in our work.

Early in 2014 we forecast the euro would fall to between $1.10 and $1.20. We are there now and the market tone tells us that it will fall further as the battle over Q.E. in the Eurozone continues. The euro price of gold is trying to make a solid break through €1,000 a signal that it is breaking out upwards. We see this as bringing in traders and speculators even in the U.S. The dollar price of gold has more work to do before it reflects the same prospects, but this week may see that work done. We expect to see the Swiss National Bank step into the market to weaken the Swiss Franc as it moves over 1.2 to the euro.

What QE really does is to protect the balance sheets of the banking system, but if, as we saw in the U.S. and now in the Eurozone, lending does not pick up as a result, we have to conclude that it is the entrepreneurial drive that brings growth back to an economy, as we are now seeing in the U.S., and not ‘cheap depreciating money’.  But the recovery we are seeing in the U.S. is not nearly as robust as we saw in the nineties and is barely discernible in the Eurozone continuing so for the next few years, because of its Socialist nature. The main drivers to growth, right now, are a cheap euro and oil. These directly impact that economy. The euro has already dropped 20% from its peak and yet deflation threatens at the door still. Europeans will turn to gold in 2015.

The silver price appears reticent to rise with gold at the moment, again waiting for direction from gold.

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