Re-evaluation Of Dollar Strength Equaling Gold Weakness

Review of yesterday’s gold and silver market activity and trends in gold and silver prices.

New York closed yesterday at $1,218.90 up $13.40 as the euro continued to fall. Gold retreated to $1,214.10 with the euro at $1.1866 ahead of London’s opening. The Fix saw the gold price set at $1,213.75 up $2.75 and in the euro, at €1,023.83 up €6.525 while the euro was another half of a cent weaker than yesterday at $1.1855. Ahead of New York’s opening gold was trading in London at $1,213.40 and in the euro at €1,024.61.

The silver price closed at $16.53 up 33 cents. Ahead of New York’s opening it was trading at $16.42.

There were sales of 2.987 tonnes of gold from the SPDR gold ETF and sales of 1.25 tonnes from the Gold Trust yesterday. The holdings of the SPDR gold ETF are at 707.821 and at 159.90 tonnes in the Gold Trust.  U.S. gold investors were clearly loath to trust the move upwards of gold in the dollar.  Certainly, if gold retains its gains, there will be a re-evaluation of the view that dollar strength means gold weakness. Gold has shown more gold strength and is changing resistance into support above $1,200 and €1,000.

Asian demand and short covering are contributing to the rises and with a little more strength in gold in the dollar a new uptrend will have been established.

Today is the day when we may hear that the Eurozone is in deflation. If today’s reports do not show that, it is expected that next month’s numbers will. The debate in Europe continues around whether Q.E. will promote growth as interest rates are already at record lows. Despite the economic weakness in the Eurozone structural flaws on this front are not being addressed. The possibility of Greece and the U.K. leaving the Eurozone reflects the disunity in the zone. With the different nations strongly retaining their nationalism after millenniums of doing so, we cannot see these structures giving way to anywhere near the unity seen in the U.S.A. Hence 2015 does not bode well for the Eurozone on the economic front and the fall in the euro is likely to continue to the lower end of our 2014 forecast.

The oil price continues to fall and is now just about below $50 for Brent and well below it for WTI. We expect more falls to come still. Again an old superficial link between oil and gold is being destroyed as oil continues to collapse yet gold rises.  It is as though people are watching in disbelief and looking around to see what ramifications will come from the oil price collapse. Is it really positive for growth? Is it realistic to see deflation in falling oil prices? A clear lack of understanding is apparent, but with gold rising, the initial impact is proving positive for gold

The silver price is now proving as vigorous on the rise as it did on the fall. Even so it still looks oversold relative to gold, to us.