Chinese absence in gold market apparent

While gold succeeded in growing stronger in trade in New York last night, Julian Phillips writes that the absence of Chinese physical demand is clearly evident.

Gold Today –New York closed at $1,378.70 down $7.0 on Tuesday. China remains closed until tomorrow.  London opened at the same level as New York’s close. It then Fixed at $1,377.25 up $7.75 and in the euro at €1,036.774 up €5.6 while the euro was slightly stronger against the dollar at €1: $1.3284. Ahead of New York’s opening gold stood at $1,377.00 and in the euro at €1,036.47.

Silver Today – Silver closed at $21.65, down $0.26 cents in New York yesterday. Ahead of New York’s opening silver stood higher at $21.78.

Gold (very short-term)

We expect gold to consolidate around current levels, in New York today.

Silver (very short-term)

We expect silver to consolidate at current levels, in New York today.

Price Drivers

Gold & Silver – While New York tried to go stronger and did so, the absence of the Chinese physical demand is clearly apparent in the gold market and, by extension the silver market.

The U.S. based gold ETF the SPDR was unchanged yesterday after the purchase of 2.706 tonnes of gold on Monday. We believe that traders and speculators are watching this number carefully as a guide to their actions from now on. With Chinese demand returning tomorrow and impacting next week, we see them as being ready to go with the flow quickly from now on.

Meanwhile, the steady appreciation of the euro over the U.S. dollar continues, even as U.S. interest rates begin to creep up. The sheer will of the markets is contributing to the rise in rates. Global financial markets are now ultra sensitive to any news pointing to such a rise. We can only emphasize Mr Bernanke’s words that the recovery could be damaged by an early rising of interest rates.  We do see the recovery globally being hurt by any influence that impacts the seriously fragile economies of the world, such as these. The failure of the developed world governments to add to the efforts of central banks to stimulate growth is the prime cause of the loss of traction we are seeing now. Japan is the most recent case of that. We see the Yen now back stronger at 96.75 to the dollar and the Japanese Nikkei index sinking. While the Japanese economy is growing, the markets are telling us that this growth is unsustainable. As to gold and silver prices they appear to be discounting deflation now, not inflation. Therefore the pattern of prices going forwards bears a greater resemblance to 2008 [first falling heavily in line with deflation, then moving up strongly] than 2005 when the gold price was rising in the growth boom of those days. We have seen the fall from $1,921 to $1,321 in the last year, so what next?

Silver – Silver’s fall yesterday was small at 1% almost in line with gold’s moves. We expect the same today.

Julian Phillips is the founder of and

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