Gold - The Weekly Global Perspective

By: Julian D. W. Phillips | Thu, Apr 1, 2004
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That was the week that was!

A week in which we find "April Fools Day". As far as we know there is no reason to associate that with the gold market this week. Quite the reverse, it will take the sharpest market man to know whether the increase in "speculative" long positions, was speculative or investment position taking? Physical demand is sitting open mouthed down at the $400 level, probably just above, hoping the price will come back again. But right now the bull is rutting and looking up. How far will it go and how far will it retreat from there - tread lightly you Traders!

Gold demand has been seen today on the Gold Bullion Securities front [Exchange Traded Fund], taking around 3 tonnes today, alone, totalling close to 8 tonnes since it reappeared in the new form. We know these buyers are holders, not punters, in the main. Will that continue, we think so.

The sheer size of the increase in tonnage bought last week has overwhelmed us all and it seems to be continuing, making quite a few bite their nails. What is so worrying is that the holders may, or may not dump their positions as quickly as they bought them. Remember pre-Iraq, how they bought all the way from $330 to $ 390 and then took it all the way back again. The genuine speculator just wants a quick turn and acts capriciously, uninterested in any fundamentals, just short term profits. As such we don't know when he will turn the other way or why he will. So we are at his mercy. If it could be shown to be solid, or driven by value, or any other such solid reason, then one can hold a strong position, but with the speculators comes the volatility. Wisely, the physical market, working on small margins, ducks for cover and waits until the price stabilises. Solid investors also tend to enter at the 'right point' and nobody likes chasing a price!

What is a comfort is that the $400 level was well fought over and is acting as a base, which is why the speculators started jumping in there. They know support is there.

In Euros, after the run right up to Euros 347, the market has sat still shadowing the Euro against the $, for the last three days. But we have seen it walk its own road, so now would prefer to see what it is really doing by watching the Euro price, more than the $ price. It looks as though it will find what it deems the correct level in either currency, and not be bound by either.

The de-hedgers have told us, by their actions, they are still buying back, which they would not be doing unless they thought the gold price would go higher.

What has become strongly apparent, is that although individual acts of terror are not gold price drivers, the clouds of instability are darkening perceptibly! In tandem with uncertainty and the unreliability of currency values, we have mounting evidence that all is not well. There are clear indications of the overbearing presence of an impending storm. It could come from many possible sources.

At the time of writing gold stood at $426.50, or Euros 347.00 with the Euro itself worth $1.2330.

Oil cutbacks from O.P.E.C.

O.P.E.C. has decided to cutback oil production by 1,000,000 barrels a day. Back in the early '70's after it became clear that the enormously weakening $ has put a very weak price on O.P.E.C. oil reserves, the Ministers of the member countries, took dramatic action to redress matters, by raising the oil price to economy rupturing levels. They succeeded and nobody could do anything about it. Despite the race going on now to lower dependency on O.P.E.C., who control one third of the world's oil reserves, the control over the price of oil still rests with O.P.E.C. Many thought the U.S. would ensure a flood of oil from Iraq after the invasion, but only a trickle followed. Hence, O.P.E.C. is still calling the shots! Their guiding principle appears to be, as the $ drops, so the oil price goes up! This will continue to guide their actions. The worsening relations between the U.S., pushing for the presence of democracy and the Islamic rulers, who at best pay scant regard for such government, will ensure that oil prices will continue high and possibly very high.

This has always been gold positive!

Speculative position on Comex

Now sitting at 481.80 tonnes, just 17 tonnes shy of the record levels seen on January 6th, with this weeks action, this level could be topped any time now. Tomorrow will tell. What is the intention of the buyers, to play for the short term profit, or to hedge against a bleak currency and economic environment? With those answers we could tell you what tomorrow will bring, but we can only turn to our charts, which "Changing Tack - Gold & Precious Metal Shares" are telling us just what is going to happen, as they have usually done. - Why not subscribe? [see above for the place to do that online]

The 2004 Central Bank Gold Agreement

Germany: - Despite the approval of Germany's Chancellor, the passage of the legislation through the German Parliament has not yet begun, nor is it a foregone conclusion that it will have a smooth or a successful passage. Don't be surprised if they are not ready until next year to sell any.

"Gold - Authentic Money" has a series of articles running on the position of the different signatories and others, on gold sales emanating from the 2004 Central Bank Gold Agreement. In the present issue we discuss the "Hidden Agenda" of Germany. We repeat what we said last week, that, if one does not understand the issues involved you will not understand the long term gold price. In a continuation of the series on the "2004 Central Bank Gold Agreement", we will be examining these issues and all the other issues surrounding the future of "Official" gold sales, very closely.

The U.S. recovery.

We are all holding our breath to see what the job figures are going to be like tomorrow. Is the recovery stalling? The very fact the question is being asked by so many, will bring a strong reaction in the markets. The indications are not good, with factory orders rising only 0.3% in February. What is apparent to us by now, is the incentives fed into the U.S. economy worked wonders in China, Japan and with the 10.9% growth reported in India in the last quarter of last year, in India too. To be fair, the agricultural sector in India also came in with bumper crops. However, the wonders spawned by the incentives did not seem to make it home to the States, yet?

The Deficit.

Just a word on the deficits building mountains of debt by the day, outside the States. Nobody is in a position to call that debt. And if anyone tried, what would be the response? The last one who effectively called that debt, was President de Gaulle of France back in the late '60's and early '70's, when he took advantage of the gold window to exchange the surplus $ he received, for U.S. gold. He kept on doing it, alongside Switzerland and Germany, et al, until the U.S. slammed the window closed, to open it only briefly and unsuccessfully in an attempt to discredit gold, by selling a few hundred tonnes at an auction. When the gold was gulped down by the market, the sales were halted and as far as the U.S. would have us believe now, the U.S. government retains a tight grip on the rest.


Silver soars to new heights, still on a speculative splurge, breaking through the $8 level, to reach a 16-year high. Volatility will continue. The mood of the market supports further gains or holding of present positions, for the time being, but it could be a cliff edge should it turn.

At the time of writing Silver was trading at $8.08


Platinum is consolidating at just above $910. The Rand is not weakening, nor will do so to the extent necessary to encourage an expansion of Platinum production, for some time to come.

The fundamentals remain solid, with happy Speculators sitting in positions waiting for the $1,000 level.

At the time of writing Platinum was trading at $912.

The London Gold Fix

Gold Fix 1st April a.m. $425.30   E 344.819
            1st April p.m. $427.25    E 345.476

- The gold price has stabilised in Euros but rises in $. It is holding to the Euro again, but is independent!


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Julian  D. W. Phillips

Author: Julian D. W. Phillips

Julian D. W. Phillips
Gold Forecaster

Julian D. W. Phillips

"Global Watch: The Gold Forecaster" covers the global gold market. It specializes in Central Bank Sales and details, the Indian Bullion market [supported by a leading Indian Bullion professional], the South African markets [+ Gold shares shares] plus the currencies of gold producers [ Euro, U.S. $, Yen, C$, A$, and the South African Rand]. Its aim is to synthesise all the influential gold price factors across the globe, so as to truly understand the global reasons behind the gold price.

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