Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Risks to Global Economy is Balanced: Stock Market upside limited short term - 20th Jan 20
How Digital Technology is Changing the Sports Betting Industry - 20th Jan 20
Is CEOs Reputation Management Essential? All You Must Know - 20th Jan 20
APPLE (AAPL) AI Tech Stocks Investing 2020 - 20th Jan 20
FOMO or FOPA or Au? - 20th Jan 20
Stock Market SP500 Kitchin Cycle Review - 20th Jan 20
Why Intel i7-4790k Devils Canyon CPU is STILL GOOD in 2020! - 20th Jan 20
Stock Market Final Thrust Review - 19th Jan 20
Gold Trade Usage & Price Effect - 19th Jan 20
Stock Market Trend Forecast 2020 - Trend Analysis - Video - 19th Jan 20
Stock Trade-of-the-Week: Dorchester Minerals (DMLP) - 19th Jan 20
INTEL (INTC) Stock Investing in AI Machine Intelligence Mega-trend 2020 and Beyond - 18th Jan 20
Gold Stocks Wavering - 18th Jan 20
Best Amazon iPhone Case Fits 6s, 7, 8 by Toovren Review - 18th Jan 20
1. GOOGLE (Alphabet) - Primary AI Tech Stock For Investing 2020 - 17th Jan 20
ERY Energy Bear Continues Basing Setup – Breakout Expected Near January 24th - 17th Jan 20
What Expiring Stock and Commodity Market Bubbles Look Like - 17th Jan 20
Platinum Breaks $1000 On Big Rally - What's Next Forecast - 17th Jan 20
Precious Metals Set to Keep Powering Ahead - 17th Jan 20
Stock Market and the US Presidential Election Cycle  - 16th Jan 20
Shifting Undercurrents In The US Stock Market - 16th Jan 20
America 2020 – YEAR OF LIVING DANGEROUSLY (PART TWO) - 16th Jan 20
Yes, China Is a Currency Manipulator – And the U.S. Banking System Is a Metals Manipulator - 16th Jan 20
MICROSOFT Stock Investing in AI Machine Intelligence Mega-trend 2020 and Beyond - 15th Jan 20
Silver Traders Big Trend Analysis – Part II - 15th Jan 20
Silver Short-Term Pullback Before Acceleration Higher - 15th Jan 20
Gold Overall Outlook Is 'Strongly Bullish' - 15th Jan 20
AMD is Killing Intel - Best CPU's For 2020! Ryzen 3900x, 3950x, 3960x Budget, to High End Systems - 15th Jan 20
The Importance Of Keeping Invoices Up To Date - 15th Jan 20
Stock Market Elliott Wave Analysis 2020 - 14th Jan 20
Walmart Has Made a Genius Move to Beat Amazon - 14th Jan 20
Deep State 2020 – A Year Of Living Dangerously! - 14th Jan 20
The End of College Is Near - 14th Jan 20
AI Stocks Investing 2020 to Profit from the Machine Intelligence Mega-trend - Video - 14th Jan 20
Stock Market Final Thrust - 14th Jan 20
British Pound GBP Trend Forecast Review - 13th Jan 20
Trumpism Stock Market and the crisis in American social equality - 13th Jan 20
Silver Investors Big Trend Analysis for – Part I - 13th Jan 20
Craig Hemke Gold & Silver 2020 Prediction, Slams Biased Gold Naysayers - 13th Jan 20
AMAZON Stock Investing in AI Machine Intelligence Mega-trend 2020 and Beyond - 11th Jan 20
Gold Price Reacting to Global Flash Points - 11th Jan 20
Land Rover Discovery Sport 2020 - What You Need to Know Before Buying - 11th Jan 20
Gold Buying Precarious - 11th Jan 20
The Crazy Stock Market Train to Bull Eternity - 11th Jan 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Gold, Silver Price Summer Doldrums Coming to an End

Commodities / Gold and Silver 2014 Sep 02, 2014 - 08:03 AM GMT

By: Alasdair_Macleod

Commodities

The pattern of trading in precious metals changed for the better this week. After London's bank holiday on Monday, for the first time in a long time the market opened in London's pre-market with higher prices. This indicated Asian or Middle-Eastern physical demand was returning to the market. Predictably, prices drifted lower during London hours as paper trading took over, and all the gains were more or less lost by close of play on Comex in New York.


It was a similar story on Wednesday. Yesterday, (Thursday) started the same way, but this time the move gained more traction; but volumes remain pitifully low, in common with open interest. Today this pattern was not repeated with gold kicking off unchanged on overnight levels. However, gold is up $15 on the week and feels more firmly based.

Measured by deliveries on the Shanghai Gold Exchange, Chinese demand is increasing, with last week's figure rising to 46 tonnes, having increased every week in August. So far this year over 1,200 tonnes have been delivered, and the extension of trading and therefore potential demand into the Free Trade Zone is due to kick off in September.

The chart of the gold price and open interest on Comex is shown below.

Gold Chart

August is a notoriously poor trading month, with traders in the northern hemisphere on holiday, or at least not thinking about markets. September is wake-up time, and statistically the best month for gold. Will this be the pattern this year?

Trading in silver continues to be healthier, even if the price performance has been disappointing, with the gold/silver ratio rising to 66 from 63 earlier in the month. Open interest had its first significant fall on Wednesday, when the price rose marginally. This suggests that on balance there is some bear closing in futures. The action is shown in our next chart.

Silver Chart

Could this be a harbinger of better times? Quite likely: being mostly an industrial metal, there is some evidence that commercial users are locking in low prices by holding futures positions. Bear in mind that two years ago, users probably estimated silver prices at $35+ in their business plans, so current prices for them are too good to miss.

Quick side-note: palladium continues to power ahead, having made all-time highs consistently in recent months to challenge $900 this week.

PMs and the economic outlook

When it comes to the broader picture, the one chart that says it all is that of the US 10-year Treasury bond.

US 10-Year Treasury Yield Chart

This is the year when the US economy was supposed to recover: not according to government bond yields. US 10-year Treasury yields slipped this week to 2.33%, and 30-year to 3.08%. The same story is evident elsewhere, notably in the Eurozone and there is only one likely explanation: the advanced economies are on the verge of an economic slump.

This matters for gold and therefore silver, because in such an event opinions are divided over the outcome for prices. Banks, which are after all children of paper currencies and credit, naturally think of government bonds as the safest of safe havens. However, in the event of a global slump, we can expect central banks to expand money supply as much as may be required to stop asset prices falling. This transfers systemic risk from the banking system into currencies, leaving gold and silver as the safest of safe havens.

Next week

Monday. Japan: Vehicle Sales. Eurozone: manufacturing PMI. UK: BoE Mortgage Approvals, Consumer Credit, M4 Money Supply.

Tuesday. Eurozone: PPI. US: manufacturing PMI, Construction Spending, ISM Manufacturing.

Wednesday. Eurozone: Composite PMI, Services PMI, GDP (2nd est.), Retail Trade. US: Factory Orders, Vehicle Sales.

Thursday. UK: BoE Base Rate. Eurozone: ECB Deposit Rate. US: ADP Employment Survey, Initial Claims, Non-Farm Productivity, Trade balance, Unit Labour Costs, ISM Non-Manufacturing.

Friday. Japan: Leading Indicator. US: Non-Farm Payrolls, Private Payrolls, Unemployment.

Alasdair Macleod

Head of research, GoldMoney

Alasdair.Macleod@GoldMoney.com

Alasdair Macleod runs FinanceAndEconomics.org, a website dedicated to sound money and demystifying finance and economics. Alasdair has a background as a stockbroker, banker and economist. He is also a contributor to GoldMoney - The best way to buy gold online.

© 2014 Copyright Alasdair Macleod - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Alasdair Macleod Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules