Silver Market Morning

Gold Today – The gold price closed at $1,235.50 up $1.60 on Tuesday in New York. In Asia and London, gold prices recovered slightly to $1,235.80. The gold price was Fixed at $1,236.50 down $2.25 and in the euro at €954.237 down €2.696, while the euro was slightly stronger at $1.2958. Ahead of New York’s opening, gold was trading at $1,237.80 and in the euro at €954.83.

Silver Today – The silver price closed in New York at $18.71 up 3 cents. Ahead of New York’s opening it was trading at $18.68.

Gold _{(very short-term)} We expect gold to try to consolidate, in New York today.

Silver _{(very short-term)} We expect silver to try to consolidate, in New York today.

Price Drivers

There were sales of 4.187 tonnes of gold from the SPDR gold ETF but none from the Gold Trust, on Tuesday. The holdings of the gold ETFs stand at 784.217 tonnes in the SPDR gold ETF and at 164.72 tonnes in the Gold Trust. This sale was a large daily sale, but failed to impact the gold price, which recovered slightly. While the Technical picture continues with a weaker bias, looking for a bottom, demand in Asia is strong right now. As we have seen in the last few months, U.S. prices have dictated the direction of the gold price, while U.S. demand is a small portion of global demand. As we have indicated, the structural changes being made in China right now, to their gold market are deeply significant in terms of where the ‘pricing power’ over gold will move to. With Asian physical demand dominant in the gold market, the ‘pricing power’ over gold should be there, if the price is reflective of demand / supply. This should be the case if the market is efficient, which, currently, it is not.

A question is, “How long will it take for the changes in the Chinese market to feed through to the global market?” We see this in terms of weeks or months, not years. A second question is, “How effective will the Yuan contracts for gold be?” This is pertinent to the definition of the gold price. To date we see it as a price in dollars. Will it be possible to see that price as a Yuan price? This has greater implications for the role of the dollar and not just in the gold market!

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Today sees the end of the FOMC two day meeting and a statement from Janet Yellen. While the media is focused on will the rise come sooner than expected, we see Janet Yellen favoring waiting longer than need be to be absolutely sure the U.S. economy can take the change. Better to be too late than too early. Being too early could harm the recovery, being too late, will not. As to the impact this may have on gold, we see it as being neutral.

Of greater significance is the state of gold demand in India. The surge in August’s gold import figures over last August has to be tempered by the fact that the restrictions were imposed last August and strangled imports of gold that month. We expect the months through to next July to look relatively good too. But it must be remembered that these are official figures and ignore the smuggled volumes of gold that come into India. If smuggled gold costs were added to the current account deficit, it would be seen that the Indian CAD remains as high as ever.

Silver– The silver price will wait for gold to rise before it does. - www.SilverForecaster.com]

Kind Regards,

Julian D.W. Phillips for the Gold & Silver Forecasters