Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
What Happens To The Global Economy If the Oil Price Collapses Below $40 - 14th Nov 19
7 days of Free FX + Crypto Forecasts -- Join in - 14th Nov 19
How to Use Price Cycles and Profit as a Swing Trader – SPX, Bonds, Gold, Nat Gas - 13th Nov 19
Morrisons Throwing Thousands of Bonus More Points at Big Spend Shoppers - JACKPOT! - 13th Nov 19
What to Do NOW in Case of a Future Banking System Breakdown - 13th Nov 19
Why China is likely to remain the ‘world’s factory’ for some time to come - 13th Nov 19
Gold Price Breaks Down, Waving Good-bye to the 2019 Rally - 12th Nov 19
Fed Can't See the Bubbles Through the Lather - 12th Nov 19
Double 11 Record Sales Signal Strength of Chinese Consumption - 12th Nov 19
Welcome to the Zombie-land Of Oil, Gold and Stocks Investing – Part II - 12th Nov 19
Gold Retest Coming - 12th Nov 19
New Evidence Futures Markets Are Built for Manipulation - 12th Nov 19
Next 5 Year Future Proof Gaming PC Build Spec November 2019 - Ryzen 9 3900x, RTX 2080Ti... - 12th Nov 19
Gold and Silver - The Two Horsemen - 11th Nov 19
Towards a Diverging BRIC Future - 11th Nov 19
Welcome to the Zombie-land Of Stock Market Investing - 11th Nov 19
Illiquidity & Gold And Silver In The End Game - 11th Nov 19
Key Things You Need to Know When Starting a Business - 11th Nov 19
Stock Market Cycles Peaking - 11th Nov 19
Avoid Emotional Investing in Cryptocurrency - 11th Nov 19
Australian Lithium Mines NOT Viable at Current Prices - 10th Nov 19
The 10 Highest Paying Jobs In Oil & Gas - 10th Nov 19
World's Major Gold Miners Target Copper Porphyries - 10th Nov 19
AMAZON NOVEMBER 2019 BARGAIN PRICES - WD My Book 8TB External Drive for £126 - 10th Nov 19
Gold & Silver to Head Dramatically Higher, Mirroring Palladium - 9th Nov 19
How Do YOU Know the Direction of a Market's Larger Trend? - 9th Nov 19
BEST Amazon SMART Scale To Aid Weight Loss for Christmas 2019 - 9th Nov 19
Why Every Investor Should Invest in Water - 8th Nov 19
Wait… Was That a Bullish Silver Reversal? - 8th Nov 19
Gold, Silver and Copper The 3 Metallic Amigos and the Macro Message - 8th Nov 19
Is China locking up Indonesian Nickel? - 8th Nov 19
Where is the Top for Natural Gas? - 7th Nov 19
Why Fractional Shares Don’t Make Sense - 7th Nov 19
The Fed Is Chasing Its Own Tail; It Doesn’t Care What You Think - 7th Nov 19
China’s path from World’s Factory to World Market - 7th Nov 19
Where Is That Confounded Recession? - 7th Nov 19
FREE eBook - The Investment Strategy that could change your future - 7th Nov 19

Market Oracle FREE Newsletter

How To Buy Gold For $3 An Ounce

Gold and Silver Hit By Strong U.S. Dollar

Commodities / Gold and Silver 2014 Nov 07, 2014 - 05:52 PM GMT

By: Alasdair_Macleod

Commodities

The dollar continued its upward path against the major currencies this week, and gold and silver prices suffered accordingly. The bears have maintained the upper hand, as shown in the following charts of Comex prices and Open Interest.


Gold Chart

Silver Chart

In both cases Open Interest has been rising, indicating a substantial and growing short position, though silver's fell sharply in heavy volume on Wednesday on technical grounds: it appears that someone rolled 6,000 contracts out of the December future into an option position. The other side of the precious metals trade is a strong dollar, strong equities and robust bond markets, which taken all together indicate that portfolio managers are universally bullish and ignoring risk. Time will tell if this Panglossian view is justified.

Silver has been particularly vulnerable, and the gold/silver ratio now stands at almost 75 times. This is not unprecedented but can be regarded as extreme. The result is retail demand for silver coins and bars has escalated, in the former case leaving the US Mint sold out of silver eagles. Demand for gold coins and small bars has also taken off with dealers in Germany and Austria reporting brisk business. Demand in China and India has also increased noticeably in recent weeks, and the Shanghai Gold Exchange reported this morning deliveries of 47.45 tonnes in the week ending 7th November, almost double the rate in July.

If Chinese and Indian citizens are increasing their purchases it is a fair bet that other Asians are as well. The big ETF, GLD, has lost only 28 tonnes since mid-October, hardly enough to make much difference, so it is no surprise that based on GOFO rates gold is now in high backwardation.

Global economic news this week has not been encouraging with growing evidence of slump conditions in Japan and developing in the Eurozone. Eurozone difficulties are affecting the UK, and the slide in the JPY, EUR and GBP against the US dollar confirms this diagnosis. At some stage, these economic difficulties will have an impact on the US economy, and without aggressive monetary action from the Fed it is hard to remain bullish of equities. Furthermore bonds are likely to see a surge in supply as government deficits widen again and corporations seek liquidity.

Put another way, financial markets today reflect very little risk, a situation that seems likely to change radically in the coming months. That being the case, there is likely to be a positive reassessment of gold and silver prices.

To summarise, today the headline story is the continuing bear-trend in precious metals fuelled by a strong dollar. This ignores the fact that demand for physical bullion is increasing significantly at these levels, and it is not dollar strength that prevails, but weakening foreign currencies driven by credit contraction, real or anticipated. Risk-off looks like being replaced by risk-on in the coming months.

Next week

Monday. Eurozone: Sentix Indicator. Japan: Bank Lending Data, Current Account.
Tuesday. Japan: Economy Watchers Survey, Consumer Confidence, M2 Money Supply.
Wednesday. UK: Average Earnings, Claimant Count Change, ILO Unemployment Rate. Eurozone: Industrial Production. US: Wholesale Inventories. Japan: Key Machinery Orders.
Thursday. Japan: Capacity Utilisation, Industrial production (Final). US: Initial Claims, Budget Deficit.
Friday. UK: Construction Output. Eurozone: GDP (1st Est.), HICP. US: Import Price Index, Retail Sales, University of Michigan Sentiment, Business Inventories.

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