Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Firmer Tone for Gold and Silver Prices

Commodities / Gold and Silver 2014 May 16, 2014 - 12:38 PM GMT

By: Alasdair_Macleod

Commodities

This week started with a severe markdown in gold and silver prices when markets opened in the Far East on Monday morning, taking gold down $12 to $1278 and silver only 12 cents to $19.03. The clue in this was the resilience of silver, which hardly moved: it was an attack on the gold price presumably designed to take out stop-losses.

From there precious metals never looked back. Interestingly, for the first time in a long time, prices advanced in London dealings, indicating they were being driven more by physical demand than trading in US futures. This is hardly a surprise given that GOFO is still negative for up to three months forward and has been in backwardation every day since 3rd April.


The sharpness of the bounce in the gold price is shown in the chart below of gold and silver prices for the year so far. Given the short-term bearishness of some of the major banks one can only conclude that there is an underlying firmness in these markets.

Yesterday’s US Initial Claims numbers came in lower than expected, triggering algorithmic traders to sell gold which fell $10 in minutes. The test will come from London later this morning: will physical buyers keep the market bid, or will there be some profit-taking ahead of the weekend?

Computer-driven traders are not getting it all their way. US bond yields have fallen dramatically, which is wholly inconsistent with a recovering economy as Initial Claims would suggest.

It is clear that very little of the money printed through QE is getting into the economy, other than by government spending, and instead is still confined to financial markets.

The most important news regarding precious metals markets was the announcement of the end of the silver fix from this August. The background to this move is Deutsche Bank’s withdrawal from the gold and silver fix, which in silver’s case left only HSBC and Bank of Nova Scotia agreeing the daily fix. Given increasing regulatory interest in the fixing processes for both precious metals, coupled with potential litigation for the banks involved, it is clear that for only two banks to continue fixing silver is untenable.

The broader question of the future of the gold fix is more important. It appears that no bank is willing to take over Deutsche Bank’s seat, raising the question why. It is likely that compliance officers at the major banks have all reached the same conclusion: that the gold fix may be difficult to defend from allegations of market-rigging, and it would be wise to turn down the opportunity. If nothing else, in my opinion, it looks like there is a growing possibility the daily gold fix will end as well.

Next week
Monday. No important statistics scheduled.
Tuesday. Japan: All Industry Activity Index, Leading Indicator, Customs Cleared Trade. UK: CPI, Input Prices, ONS House Prices, Output Prices.
Wednesday. Eurozone: Current Account, Flash Consumer Sentiment. Japan: BoJ MPC Overnight Rate.
Thursday. Eurozone: Flash Composite PMI. UK: GDP, Index of Services, Public Borrowing, Retail Sales, CBI Industrial Trends. US: Initial Claims, Flash Manufacturing PMI, Existing Home Sales, Leading Indicator.
Friday. US: New Home Sales.

 

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

© 2005-2022 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