Greek bailout deal unworkable – IMF

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

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Grexit: Apocalypse postponed – again? Gold stutters

So the Greek Parliament has affirmed the acceptance of the latest suite of austerity measures despite something of a revolt inside the ruling party which doesn’t bode well for stability ahead.  It seems that staying in the Eurozone is seen as of primary importance for the Greek people and also keeping Greece in it as hugely important to its EU partners.  The Greek decision should free up funding of up to $86 billion to get it through its latest financial crisis and save the country’s banking system from total collapse, but there are still plenty of hurdles ahead  – in the face of warnings from the IMF that the Greek situation is actually far far worse than the figures which have been used so far would suggest, indicating further bailouts will become necessary.

Thus the global economy has breathed something of a sigh of relief and safe haven investments like gold and silver have suffered accordingly with the dollar rising against the Euro and prices being marked down.

But can Greece deliver, and does the EU trust anything that Prime Minister, Alexis Tsipras promises?  Indeed will the latest apparent total climbdown by the Greeks lead inevitably to a change in government given that it goes entirely against the results of the recent Greek referendum which rejected the EU’s demands pretty categorically?  There has to be a good chance that Tsipras will have to resign given that any agreement on these terms goes entirely against what he has been promising the electorate for the past five months since he and his left wing Syriza party, were elected.  His high stakes poker game seems to have ended in total failure and personal humiliation at the hands of the EU’s political elite dominated by European powerhouse Germany and its President Angela Merkel who have taken a hard line throughout.

The Greek Parliament has thus now agreed to the series of six reform bills demanded by the EU, but not without some serious opposition from members of Tsipras’ own Syriza party (including recently sacked Finance Minister Yanis Varoufakis) and its coalition ally.  This would seem to condemn the Greek people to years more of austerity given the nation’s debts are seemingly almost endless.  But then the alternative could be even worse.

Whether weariness with the whole process will now set in and the Greek people will meekly accept Europe’s dictates, or whether there will now be street protests which could well turn violent – indeed there has already been some limited violent protest ahead of the vote – will remain to be seen.  One suspects reaction against Germany and Germans in particular, which has been seen to be the chief architect of the imposition of ever more austerity, could be unpleasant.  Indeed Germany has come in for strong criticism from many economists over its self-interest position over Greece.  Keeping Greece in the Eurozone is seen as a way for continuing to depress the Euro exchange rate thus benefiting major exporting nations like Germany.

Everyone knows that there’s no way Greece can repay its debts, which means its citizens face continuing austerity indefinitely unless and until some more acceptable form of debt relief is negotiated.  Germany’s hard line prevents this – and some feel that this could lead to Eurozone fragmentation as other smaller nations may see it as effectively putting them under total German financial dominance.  It certainly will provide ammunition for those in the U.K. seeking total EU withdrawal, and if this happens and the U.K. successfully negotiates an exit, then it is felt others may follow.

Impact on gold

But coupled with other factors – a government-manipulated at least temporary end to the Chinese stock markets collapse and yet another statement from the U.S. Fed’s Janet Yellen that interest raising will likely be initiated this year, and the combination saw gold stuttering yet again.  This because the Greek and Chinese situations appear for the moment to have reduced financial uncertainty in the markets while the will she-won’t-she Yellen Fed ever continuing interest rate yoyo effect on the gold price has helped move gold down yet again.  For the gold investor, whatever the short term impact may prove to be, the sooner the Fed makes up its mind and announces a definite interest rate raising programme, the better.  There could be a further downwards knee-jerk reaction in the markets but we wouldn’t necessarily expect that to continue.  Surely the effects have already been taken into account in gold’s lacklustre performance so far this year?

But while the EU has initially voted to accept Tsipras’ latest climbdown and avoid the Greek exit from the Eurozone (Grexit) which had looked very much on the cards, it still remains dependent, among others, on German ratification tomorrow, although this seen as likely given Angela Merkel’s strong support for the decision.  There is already an acceptance in Germany that Greek indebtedness is yet far worse than current official figures suggest and any payback will take years longer than current estimates would indicate, indeed may be indefinite and that it may only be a matter of time before a new bailout is required.  How long can this go on?.

If all is approved and Greece thus comes back from the brink yet again, it still has to deliver, or the whole house of cards that is the Greek economy and banking system, could come crashing down in flames yet again.  And that Greece can deliver, given its history of tax avoidance by the wealthy, its huge pension commitments etc., has to be very much in doubt.  We’d give it a 40:60 chance at best – others rate it 20:80!

Greek deal will keep Euro weak vs dollar

Julian Phillips’ latest Market Morning

New York closed yesterday at $1,149.30 down $5.90 with Asia and London taking it $2 lower. The dollar was stronger at $1.0934 down from $1.1011 against the euro with the dollar Index at 97.27 up from 96.66 before London opened.  The LBMA gold price was set this morning at $1,145.10 down $9.65 in reaction to the rising dollar. The euro equivalent was €1,051.08 up €3.55. Ahead of New York’s opening, gold was trading in London at $1,145.20 and in the euro at €1,051.32.

The silver price fell to $15.11 down 27 cents in New York. Ahead of New York’s opening it was trading at $15.00.

The gold market continues to see thin trade with few buyers or sellers, allowing the gold price to be nudged around by currency moves. Short positions are at extremely high levels on COMEX as Janet Yellen made it clear the Fed wants to begin a very slow and small lifting of interest rates, so as not to damage the recovery that is still vulnerable. More importantly she wants to cause as little disruption to bond and equity markets as they transition out of no rates rises, with rates at record lows, to a market where the trend change for rates will be to the upside. We see the beginning of such rises occurring as 2015 ends, not before then, as the recent economic data from the U.S. is proving disappointing. We point out that rate rises have already been discounted in the gold price as they have been hyped for years now.

Nevertheless the gold price is being nudged down as the dollar moves stronger. There were no gold ETF sales or purchases yesterday with the holdings of the SPDR gold ETF still at 709.65 tonnes and at 167.40 tonnes in the Gold Trust.

Looking back at Greece, now that it will not impact the euro exchange rate, we stand back to see the ‘big’ picture. From there we see the objective of the E.U. as it has always been was to retain the weak member links to ensure a weak euro. Without a weak euro there would have been little point in including such members, as no global trade advantage would be gained and no drawing off of E.U. trade without a ‘fixed’ exchange rate via a common currency. With Greece accepting vast loans that both lenders and borrowers know cannot and will not ever be repaid, the weakest link Greece is now locked into the E.U. and the euro structured to remain weak. The competitiveness of German and other strong E.U. member exports, is now consolidated and it gains additional competitiveness that outnumbers any loan losses to Greece by considerably more than tenfold. This will directly impact U.S. export potential in the years to come [as is being seen on aircraft already].

Silver will likely fall faster than gold, just as it will rise faster. It will not move independently of gold.     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

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

Gold price attention swings back to dollar strength

New York closed yesterday at $1,157.90 down $5.10 with Asia and London taking it down to $1,155. The dollar was stronger at $1.0992 up from $1.1147 against the euro with the dollar Index at 96.94 up from 95.87 before London opened.  The LBMA gold price was set this morning at $1,153.20 down $1.75. The euro equivalent was €1,045.51 down €2.38. Ahead of New York’s opening, gold was trading in London at $1,154.00 and in the euro at €1,046.14.

The silver price rose to $15.50 down 8 cents in New York. Ahead of New York’s opening itoday t was trading at $15.36.

The attention of the gold price has, as we said yesterday swung back to a stronger dollar and away from the Greek tragedy. The deal between Greece and the E.U. needs to be ratified in the Greek Parliament before it is a reality, but we see no danger to the euro from Greece any more.

Dramatically, it seems that Iran and the U.S. have reached a deal, at last. While the oil price has and will fall because of this we do not expect Iranian oil to hit the market, any more than it is doing at present until the middle of next year. Even then it will only be at around 15% of its peak production of 3.5 million barrels a day. Nevertheless, while there is an oversupply, there is more likelihood of prices falling then rising until then. The deal does seem to open the way for Iran to take a higher profile in the fight against ISIS, but will worsen relations between Saudi Arabia and the U.S. We do not see this leading to a change in Saudi Arabia’s use of the dollar to receive payments for oil. If this happened it would be positive for gold prices.

The most important event in the last month for gold and silver has been the fall in the euro price of gold when the prospect of Greece leaving the E.U. was real. Of great interest to all is the strength of the dollar and just how far it will rise and the euro fall. It could easily fall to par if the U.S. does not prevent that. The U.S. recovery cannot remain intact if the euro falls too far!

A look at the gold price in other currencies also shows its resilience, while in the dollar it has been in a +$50 [5%] trading range for the last 18 months. Professional investors in the U.S. have been long of gold in weak currencies such as the euro and the Yen profitably so. We see this as continuing.

Silver will likely recover faster than gold now.   ,

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

 

Potential for instability and uncertainty increasing: World heading for extreme times.

Julian Phillips’ analysis of what’s happening in the gold and silver markets, sees some very uncertain times ahead.

New York closed at $1,162.40 up $3.60 with Asia and London holding it there in a barely changed market. The dollar was weaker at $1,1107 down from $1.1033 against the euro with the dollar Index 96.11 down from 96.50.  The LBMA gold price was set this morning at $1,162.40 up only $0.30. The euro equivalent was €1,038.27 down €14.69. Ahead of New York’s opening, gold was trading in London at $1,160.10 and in the euro at €1,037.01.

The silver price rose to $15.46 up 32 cents in New York. Ahead of New York’s opening it was also trading at $15.46.

Has Tsiprias done enough? Has he committed political suicide? Will he get the Greek Parliament’s backing? Will the E.U. feel it is enough? The German Finance Minister agrees that Greece cannot repay its current debt, but will not go with a debt write down. Better to make repayment last for 40+ more years at a miniscule interest rate, he feels. A rose by any other name? Monday will see if this issue will impact the exchange rate of the euro or not. The dollar gold price is relatively unmoved but with the euro climbing the euro price of gold is falling. Next week could prove dramatic! Certainly it looks as though, at last, there could be a resolution to the story? Markets are, on balance looking for the E.U. to accept the latest Greek offer, but we would rather wait and see. Until next week we do not see any really strong moves in currencies or precious metals.

The Chinese government’s ‘shackling’ of the Shanghai equity market is more a clash between Communism and free markets than it is of global economic concern. China had thought that it was a way of increasing wealth but did not account for speculation.

With the IMF lowering global economic growth forecasts and, in particular, that of the U.S., the potential for instability and uncertainty has increased. This takes us towards extreme times. With the Fed looking at the end of this year or next before raising interest rates, they too are keeping their heads down. What is important about these downward looking prospects is that this is all that has been achieved after 7 years of efforts to stimulate the global economy and in particular the U.S. economy. Is the global economy on a self-sustaining road forward to better times? That’s not what we are hearing. So are we at the bottom for gold and silver prices? With China aiming to have more control over the gold price and to inject the Yuan into the global monetary system there is a case to be made for this thought.

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

Chinese market manipulation arrests falls

Julian Phillips’ latest take on what is driving global gold and silver markets

New York closed yesterday at $1,158.80 up $3.00 with Asia and London taking it up to $1,162.80. The dollar was almost unchanged at $1,1033 against the euro and the dollar Index was almost unchanged at 96.50 up from 96.45. The LBMA gold price was set this morning at $1,162.10 up $7.85. The euro equivalent was €1,052.96 up €7.25. Ahead of New York’s opening, gold was trading in London at $1,162.20 and in the euro at €1,053.39.
The silver price rose to $15.14 up 4 cents in New York. Ahead of New York’s opening it was trading at $15.35.
If Greece holds its position, then the weekend will see the first chink in the E.U. armor. Gold and silver prices will not overreact until next week, but speculators will try to make them, we’re sure. The current fall in gold and silver prices prices was speculative but the demand that filters through to London and New York will remain restrained until next week. The slight rise in prices today leans towards a dramatic week next week.
Once there is a Yuan Gold “Fix” we do expect to see more of a global price for gold and silver. The Chinese, when we look at yesterday’s moves to control prices in equity markets will work to ensure stability in precious metal prices, globally in time. They certainly have the market power to do so.
Anybody that doubted the existence of market manipulation need only look at China, where holders of share in a company that exceeds 5% may not sell for 6 months. 1300 companies have suspended trading in their shares and the government is hunting down ‘malicious short sellers”. No doubt when caught they will get jail time or worse? This contrasts strongly with the western concept of speculator. With a market that has fallen 30% in the last three weeks and looks as though it could fall to 50% of its peak in a short time China clearly does not like what can happen in ‘free’ markets. But today with these remarkable measures, the Chinese equity market is giving the appearance of recovering.
Looking away from Greece to the potential ‘ripple’ effects of Greece leaving the euro, a foundation concept of the Eurozone and euro will have been mortally wounded. The future of the euro will be questioned and although we see it continuing as the second global reserve currency its stability will be damaged as will its relationship with the U.S. dollar. Many doubt that gold will become a more important reserve asset, but we don’t. When nations under pressure, like Russia, tell the world they ‘have enough gold and….’ to withstand financial shocks, then we know that globally, nations accept that gold is a protection in extreme times as international money. This won’t change!

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

Has return to drachma always been Tsipras’ hidden agenda

One wonders if Alexis Tsipras’ policy has been aimed at a Eurozone exit from the start, but in a manner acceptable to the Greek population.

Greece has gone down to the wire and beyond, but  call me cynical – has this been Greek Prime Minister Alexis Tsipras’ plan all along? Coming up with demands with which there is little likelihood of acceptance by the country’s creditors, and then exiting the Euro by being forced out by the wicked Germans and their allies, could be what he has been aiming for all along. But this may have been coupled with perhaps the tiny chance that the Eurozone would cave in which would make him a national hero, and this still remains a possibility given the Eurozone keeps on extending the final deadline for reaching some kind of satisfactory agreement.

Go back in time, and much of the left wing Syriza political party, now in government, took an anti-Euro stance. And its coalition partners, the right wing Independent Greeks party perhaps even more so.  But with opinion amongst the Greek populace hugely pro remaining in the Euro, the pragmatic politician stance took over. Clearly Syriza with a break-from-Euro clause in its manifesto would almost certainly have been unelectable, so this policy disappeared and Syriza was elected, but now with a supposedly pro-Euro stance.

But the negotiations with its creditors – if they can be called negotiations with neither side prepared to give ground on the key demands – could have always been designed from the Greek standpoint to have the nation ejected from the Euro. Alexis Tsipras and his colleagues have supposedly been desperately trying to salvage Greece’s Eurozone membership without making any serious concessions – an untenable position. If Greece is forced out, which looks increasingly likely, he can say that ‘we did our best, but Angela Merkel et al were just intent in grinding Greek noses into the dust’. That is probably the only rationale which could see a Euro exit, but still keep the populace on Syriza’s side, with the undoubted hardships which would follow.

And there would be hardships. But then there are enormous hardships already afflicting the Greek people. Was it ever thus? Greece has a long history of the elite putting the country into serious debt and the poor having to survive with the consequences. This may be Syriza’s attempt to break the mould and really force the Greek wealthy elite to pay their way.

The problem perhaps with the Tsipras extended negotiating ploy is that the banks have already virtually run out of money. In gaining control of its own currency – presumably the drachma – Greece can print its way out of that problem but at the cost of hugely devaluing the new (old) currency. This will make imports prohibitively expensive, although would provide a massive boost to the hugely important tourist industry – the silver lining in the cloud?

48 tonnes of gold traded on SGE in a single day!

Julian Phillips’ latest commentary on the gold and silver markets and the factors driving them as yet another Greek deadline looms.  Could this be the final one.
New York closed at $1,155.80 down $13.10 with Asia and London holding it there. The dollar was  weaker at $1.1038 against the euro from $1.0970 and the dollar Index was lower at 96.45 down from 96.87. The LBMA gold price was set this morning at $1,154.25 down $12. The euro equivalent was €1,045.71 down €17.22. Ahead of New York’s opening, gold was trading in London at $1,155.10 and in the euro at €1,046.14. The silver price fell to $15.10 down 59 cents in New York. Ahead of New York’s opening it was trading at $15.03.

Another Greek deadline, really? This time we might well be there! With the E.U. telling Greece it needs more proposals or that’s it and Greece waiting for a better deal, both sides are preparing for the exit.

We would be surprised to see Greece waiting for the death blow to their banks, without rushing
Drachma to their banks in time for the financial system to be ‘rescued’. This should happen this
weekend. But nothing is predictable on this matter now. Political posturing has taken over.

Meanwhile, the equity market rout in China is considerably worse that the west has seen for 88
years. Government measures have not halted the fall which appears to be heading to 50% of its June peak. It’s a bear’s paradise! It will take a long time before confidence in the equity market is restored there.

Late in June 48.33 tonnes of gold was apparently traded in a single day on the Shanghai Gold Exchange, [according to the China Times], showing just how strong Chinese demand is if the figures are correct and the disjoint between New York/London and Shanghai is in the gold market.

This demand for gold has not spilled over into New York or London, yet. With the Bank of China still learning the ropes of being an LBMA member at the price setting we may see the gold price react simply to western market influences and not to fundamentals, for a little while longer still. Could China even  be pushing prices lower in New York or London?

We are at a very critical point on the Technical side.

Since Friday there have been no sales or purchases of gold from the SPDR gold ETF or the Gold
Trust. The holdings of the SPDR gold ETF are at 709.65 tonnes and at 167.40 tonnes in the Gold
Trust.

Silver and gold were knocked back yesterday but could have found a bottom at current levels.
Julian D.W. Phillips for the Gold & Silver Forecasters ­ http://www.goldforecaster.com
and http://www.silverforecaster.com

Big Greek No! So what next for the Eurozone and gold

The die is cast.  The  big No vote in the Greek referendum will lead to further negotiations but Julian Phillips in his latest market analysis reckons the EU and ECB will refuse to budge and that Greece will have already printed drachmas to replace the Euro.  

New York closed Friday at $1,167 up slightly. Asia and London took it down to $1,164. The dollar was 0.25 of a cent stronger at $1.1029 and the dollar Index was higher at 96.45 up from 95.93.  The LBMA gold price was set this morning at $1,164.25 down $4.00. The euro equivalent was €1,055.67 up €3.00. Ahead of New York’s opening, gold was trading in London at $1,165.60 and in the euro at €1,056.47.

The silver price fell to $15.65 up 6 cent in New York. Ahead of New York’s opening it was trading at $15.60.

Last week we said, “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%.” – It seemed that the Greeks understood this and rejected the offer from the E.U. Any negotiations going forward will undoubtedly include these, or more liberal terms for Greece from the Greek side. The E.U. just will not go along with this as the bulk of members will vote against it. We have no doubt that the new Drachmas are already printed and ready to go out to the Greek banks. The E.C.B. will wait for the political OK for it to cut off funding to the Greek banks.

By way of comparison, Argentina, is still in the midst of its debt crisis but an economic recovery, unemployment down to just over 6%, down from 22% seven years ago and using the Peso and not the U.S. dollar. So there is life after default! For gold and silver investors, it is not the Greek crisis that is the issue but the exchange rate of the euro. At first the euro dipped slightly, but with the weakest member likely to exit the E.U. it is likely to go stronger. The E.U. Finance Ministers will show the way forward tomorrow.

In China it is not the Greek issue that is causing the equity market to fall but the mess being made by the authorities in managing the ‘bull’ market. Likely the average Chinese investor is losing confidence in equity markets and staying with gold. Last week saw a huge 46.1 tonnes of gold withdrawn from the Shanghai Gold Exchange [the official gold demand figure].

On Friday there no sales or purchases  of gold from the SPDR gold ETF or the Gold Trust.  The holdings of the SPDR gold ETF are at 709.65 tonnes and at 167.40 tonnes in the Gold Trust.

Silver is waiting for gold, which is waiting for currency reactions.

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

 

Greece in default but gold and silver still weak

Julian Phillips’ latest take on the post default Greek situation and its lack of any positive impact on the prices of gold and silver.

New York closed yesterday at $1,172.50 down $6.70. Asia and London held it there. The dollar was half a cent stronger at $1.1124 and the dollar Index was higher at 95.70 after being 95.24.  Then the euro started to fall again and the LBMA gold price was set this morning at $1,171.70 down $3.30. The euro equivalent was €1,057.73 up €5.81. Ahead of New York’s opening, gold was trading in London at $1,170.20 and in the euro at €1,054.80.

The silver price fell to $15.72 unchanged in New York. Ahead of New York’s opening it was trading at $15.60.

Officially, Greece is in default, despite it being called, ‘in arrears’. And yet the markets remain unmoved. Greece asks for a new bailout package and is refused. Markets have ignored that. Now we expect no market action because of Greece, until the way forward [in or out of the euro and E.U.] is clear. The gold price will only move if the euro is directly affected. You can be sure that no matter how bad the balance sheet of other E.U. members look or even that of the E.C.B., we will be fed palliatives constantly in the hope that confidence in the euro will be maintained. Why should the gold price move then? Because of waning confidence and the need to turn to something that has been solid in extreme times.  Before that there is little point in reacting to every new stage of the ‘negotiations’. The gold price has told us that over the last few weeks.

What we see of greater importance is the downturn in Japan at the height of the relatively massive quantitative easing’ program we are seeing there. If this Q.E. fails then it is a condemnation of the policy. What will result is a quantity of money out there that is far greater than before within an economy that hasn’t grown in size. A cake that was the same size before the availability of money rose will simply rise in price, without producing more cakes. But as most Q.E. has been contained within the banking system, without being available to the consumer, even inflation is restrained. While we look at the market with high P.E. ratios and interest rates at record lows, many large funds are taking their money off the table now. Markets could still rise, but the quality of that investor is lower, chasing short-term profits. We quote one fund manager, “It’s clear that we are currently in an environment of frothy valuations”. We can see no good reasons for prices to rise more, but they may and increase the froth. Consequently, what does the future hold? This is what the Fed fears too!

On Tuesday there were no sales or purchases from or into the SPDR gold ETF, or the Gold Trust.  The holdings of the SPDR gold ETF are at 711.439 tonnes and at 167.79 tonnes in the Gold Trust. Silver is looking for lower prices ahead of gold. Speculators are pressing prices down as the way of least resistance.

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

 

Gold up on Greek crisis – but gains limited

As Greece closes banks and stock market and implements capital controls, the gold price has moved up but seemingly by less than anticipated given the magnitude of the crisis. Julian Phillips’ latest analysis.

New York closed at $1,174.10 up $1.00. Asia took it up $6 and London then pulled it back to $1,177. The dollar was 2 cents weaker at $1.1017 and the dollar Index was higher at 95.69 up from 95.10.  The LBMA gold price was set this morning at $1,176.50 up $2.10. The euro equivalent was €1,064.71 up €16.75. Ahead of New York’s opening, gold was trading in London at $1,180.00 and in the euro at €1,056.87.

The silver price fell to $15.80 down 7 cents in New York. Ahead of New York’s opening it was trading at $15.87.

After hours, Greece announced that it will keep the banks closed for a week ahead of a referendum on Sunday. We expect the Greek payments system to come to a halt and Greece’s economy to struggle to stay functioning properly. This can only be sustained for a short time before the damage becomes uncontainable. There is little doubt that Greece will be in default on Wednesday and wait for the results of the referendum before doing anything more. Until the direction forward is clearly given by the Greek electorate, we do not expect the banks to open. Capital Controls are now in position with no capital allowed to be moved out of Greece and only €60 a day can be withdrawn from ATMs.

Over the weekend the euro fell two cents but is trying to recover through $1.11 now. We see intervention in the markets today in Europe while attempts are made to calm them. Such intervention may last the week, until the referendum results impact on the markets. We are in no doubt that intervention will only be a little oil on troubled waters as, first Asian equity markets responded negatively to be followed by global equity markets move down to contain risk levels. No matter how much intervention is seen in global markets we are in a global situation where turmoil and uncertainty reigns. Italy holds €39 billion of Greek debt.

The gold price ran up to $1,180 before London opened, but has yet to really react to the Greek situation. We see the gold and silver prices reacting only after the ‘ripple’ moves out of the E.U. to the euro exchange rate and to global markets, fully. The full reaction to the weekend’s news on Greece will not be felt until next week. If the referendum says no and Greece leaves the E.U. then we will see the full impact. If Greece says yes, then it may no longer qualify as a member of the E.U. and be forced to exit. It seems there is an 85% chance of a “Grexit”. Then we will have the full impact affecting gold.

Of lesser importance but symptomatic of global debt consequences, Puerto Rico has announced it cannot pay its debts. It only has debt of $72 billion and is likely to enter Chapter 9 bankruptcy. How long are record debt levels sustainable across the world?

On Friday 1.789 tonnes of gold were sold from the SPDR gold ETF, but nothing from the Gold Trust.  The holdings of the SPDR gold ETF are at 711.439 tonnes and at 167.79 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

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

 

China’s biggest commercial bank wants to join LBMA gold price benchmarking process

Julian Phillips’ latest outlook on global gold and silver markets and the factors driving them

New York closed at yesterday $1,174.40 down $3.20. Asia took it up $3 but London sent it back to New York’s closing level. The dollar was stronger at $1.1170 down 0.31 of a cent and the dollar Index was higher at 95.44 up from 95.20.  The gold price was set this morning at $1,174.60 down $1.15. The euro equivalent was €1,051.57 down €1.89. Ahead of New York’s opening, gold was trading in London at $1,173.45 and in the euro at €1,048.00.

The silver price rose to $15.90 up 7 cents in New York. Ahead of New York’s opening it was trading at $15.80.

China’s Industrial and Commercial Bank of China (ICBC) is interested in participating in the London gold price benchmarking process, the bank said during the LBMA bullion market forum. We believe that if they do we will see more Chinese banks joining. To what end? At the moment the Chinese banks are buying straight out of the Shanghai Gold Exchange which according to government there is an accurate reflection of total Chinese gold imports.

By joining the LBMA gold setting process China will find an alternative source of supply of physical gold, often at better prices than they can in China. Their operations will include arbitrage operations which will remove price disparities between the two markets. For instance, should a speculator short physical gold in London he may find his counterparty from China wants delivery. So to cover his position he may have to pay up for that gold to get it. We may see a considerable decline in such activity as a result as it will sap the liquidity of the London [and likely the New York] market. The gold price will then become a more accurate measure of demand and supply and give China a much bigger level of influence over the gold price.

The gold price in the last few days has been driven by speculative interests in a thin market. As we have said before, we do not see the Greek crisis, flip-flopping from expected deal to no expectations of a deal as presently influencing the price, but by speculators trying to drive the gold price up or down in a thin market where prices are more easily influence by smaller deals. Only when a substantive factor comes into the market will we see solid moves in the gold and silver prices.

There were purchases of 0.895 of a tonne into the SPDR but none into the Gold Trust on Wednesday. The holdings of the SPDR gold ETF are at 705.475 tonnes and at 167.79 tonnes in the Gold Trust.

Silver may show more resilience than gold, now.

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

Indian gold monetization plans dealt fatal blow?

Julian Phillips’ latest take on global silver and gold markets and the forces driving them

New York closed at $1,177.60 down $7.50. Asia held the price at New York’s close and then London took it down $2 at the opening. The dollar was stronger at $1.1201 up 0.60 of a cent and the dollar Index was higher at 95.20 up from 94.81.  The gold price was set this morning at $1,175.75 down $7.60. The euro equivalent was €1,049.68 down €4.86. Ahead of New York’s opening, gold was trading in London at $1,177.60 and in the euro at €1,051.71.

The silver price fell to $15.83 down 37 cents in New York. Ahead of New York’s opening it was trading at $15.90.

With a day to contemplate the new proposals from the Greek government it appears that they have been rejected by the E.U.  Indeed, Tsipras informed the media that these proposals had been rejected already. But the markets have not reacted to this yet. There is a further emergency meeting of the E.U. Finance Ministers this evening, at which their counter proposals will be pressed upon the Greeks. The E.U. have rejected more taxes on the wealthy knowing they will not be paid. From where we stand, the proposals of more taxes, in a country where tax evasion is a national sport also seem meaningless. A slow increase in the pensionable age [currently 50] may well not be seen as substantive enough. It also seemed only possible, that the Greek Parliament would support the proposals in the first place. Further demands from the E.U. may prove too much for the Parliament.

The E.U. have handed counter proposals back to Greece for today’s meeting. Tomorrow we will see the way forward [it’s hoped]. Meanwhile, currency markets seem to be marking time.

Was yesterday’s fall a result of the seeming agreement between the E.U. and Greece? We think not, but the speculators that ran at the gold and silver prices did so, thinking an agreement between the E.U. and Greece was factored into the price. The failure of the gold and silver prices to rise today tells us that Greece is not a factor. What will be a factor is a failure to reach an agreement between the two this week.

India’s plan to monetize gold inside the country has just received a mortal blow from the Reserve Bank of India, who said that banks would start to hoard gold if the scheme to monetize gold went forward. We did not think it was a starter when it was first put forward.

The Indian gold market is in quiet season still and gold demand is only reactive to lower prices.

Reports from China show that demand as measured by the Shanghai Gold Exchange remains robust. But it does appear that this demand is not being fed by either the London or the New York markets, yet, which explains the independent road the London and New York markets are walking.

There were no sales or purchases into or from the SPDR or the Gold Trust on Tuesday. The holdings of the SPDR gold ETF are at 705.475 tonnes and at 167.79 tonnes in the Gold Trust.

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