Gold - The Weekly Global Perspective

By: Julian D. W. Phillips | Thu, Apr 15, 2004
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That was the week that was!

And what a week that was! Speculative fund buying took the large scale long position of the Speculators to 609 tonnes of gold, a massive record, way above previous levels. But as we had warned in our publications, these were capricious holders and could easily break cover', on the slightest news. They did too, dropping the gold price over $10 between fixes on Tuesday, a spectacular fall for the speculators, but a delight for the physical buyers, who had been patiently sitting in the wings for just such a drop. We talked about the Indian demand last week, which stepped up to the plate from around $405 and will continue to do so on weakness. That initial sell-off could have been over 100 tonnes, with more following? And what a pleasure for them, because they bought at excellent Rupee prices. If with the arbitrage discount they were buying at $422, it was $414, then with the strength of the Rupee [3.5%] the price equivalent dropped to $397, so with a fall to $405 the day before yesterday then to $400 price equivalent for them was around an effective $382.5 down to $375.

Meanwhile the fall from the $420+ level to the $400 level was only Euros 9 in Euros. But the further fall to $395 saw gold drop equally against both currencies. Until then, the accompanying fall in other precious metals showed another mainly Euro $ play. So gold has fallen over $35 since last week, an 8% fall one way. This volatility should continue, but which way[?] see below.

It is clear from the market's action that the physical buyers will not rush into volume, but will allow the price to reflect the desperate sellers plight, before moving in to their own advantage. This pattern should continue as the price consolidates at the lower levels.

We believe that even de-hedgers, still expected to be strong in the market place, will also let the blood flow before picking up their gold at lower prices too.

At the time of writing gold stood at $398.75, and Euros 333.80 with the Euro itself worth $1.1946.

No easy formula: - It is a natural tendency to try to find the easy formula to explain price moves. We have to say that there is no easy formula. The market is growing more complex by the day, with one factor influencing the market one day, another, another day, often ignoring the fundamental factors dominating the price. Each wave of price moves can be prompted by a different factor. Our persistent analogy of the sea, applies with more force than ever. The main ‘wave driver' this week has been the perception that the unexpectedly strong retail figures are good for the $, on the assumption that higher interest rates will follow, making the $ more attractive. More on that below!

$ prices for the Speculator: - An important facet of the gold market is that virtually the entire large scale speculative community sees gold in $ terms, and in no other currency, just as the Indian buyer focuses on the Rupee price and the South African Miner on the Rand price of gold. That's what they pay for it in and get for their gold. However, they do use the Euro as a guide to the value of gold, so react to $ related news. They reacted to the Silver price the same way.

Where will the next wave take the price to now? The reverse of where the $ is going to, provided the ‘$ driven, market-makers' continue to ‘hold sway'.

But there are a considerable number of other fundamental factors that can come into play at any time, grabbing the reins of the market. We will continue to give perspective and insight into each of these only on the surface, in this report, but in depth, in "Gold - Authentic Money". We are not simply gold bulls in these columns, we take a realistic look at the market and write accordingly. Our Subscribers will testify that our actions of late show that we will and do make a profit on the fall as well as the rise. One has to go with the flow in any market, so we strive to give our Subscribers the realistic picture, so as to keep making profits, either way. Here's how we do it: -

"Changing Tack" & "Changing Tack - Gold & Precious Metal Shares" - Track record & style.

We feel bound to tell you that we got the last moves in both Gold and Silver right! Mind you, we have been getting the price right for some considerable time. We prefer to chase good moves in the prices, not the small quick moves. Our research tells us that successful very short term traders get 52% of trades right. We prefer our rate of around 90% right, with far fewer moves, because we like to keep our profits. We managed to take $160 out of the gold price last year which saw the year begin with a gold price of $340+. However, we do support the quick traders with our protective stops, moving with the changing prices, plus our very own M.E.S.A. formulae, which predicts the timing of highs and lows. In addition, we also have a Comparative Performance model, which we developed, which will tell you the leaders and laggards in the main, good quality, gold and silver shares, over the short term. To subscribe [ ]or get a past example, please contact us at the above addresses.

German gold sales, growing less and less likely by the day.

The knives came out and Welteke was gone, over a discrediting incident, which happened to coincide with the power play at work over the issue of selling gold. We are of the opinion that gold itself was not the issue. The transfer of executive power from the Parliamentary Banking Committee to the Bundesbank was.

The reports had him telling them to keep off the German gold, why? After all, he was the one that promoted the sales in the first place. Schroeder had given him direct support, now the opposition of the Finance Minister Eischel came into play - why? The opposition party was against the sales, as were the Banking Committee. The plot has thickened considerably. We cannot give you the full story here, so please subscribe to "Gold - Authentic Money" as soon as possible, so you can get the entire series of articles covering the positions, backgrounds and attitudes of the different countries involved in the "2004 Central Bank Gold Agreement". There have been two so far, one summarising the overall picture, followed by one on the German position, including its "hidden agenda". For sure, the prospect of German gold sales is by no means certain! If they don't sell, who will? If these nations do not meet the ceiling agreed in the new agreement, what will the effect be on the market?

Please note that if one does not understand the issues involved you will not understand the long term gold price.

France to sell 500 tonnes??

Whilst Noyer, the Governor of the Bank of France, appears to have changed his stance on gold from "there is no debate" to an apparent willingness to sell up to 500 tonnes of gold over the next five years, one has to understand the events that have taken place in Germany, as well as the French style of doing things. Noyer knows his place, relative to government, but his previously reflected attitude is first and foremost French. Discussions on the sales are taking place, but don't assume that they sales are going to take place. Why? Read about this approach, style and potential conclusions in the articles described above, too. The issue on France is the next one to come out.

The U.S. recovery.

No doubt about it the U.S. recovery is healthy! Is it sustainable? It looks as though it is and we hope it is, because a healthy U.S. economy is good for all [including gold]. Sales at U.S. retailers rose 1.8 percent in March, the biggest increase in a year, led by purchases of autos, furniture and building materials. But the gold price is not about the state of the U.S economy. It is about the real value of paper money! The market is reading the $ stronger because of the healthy economy, why? Commentators are saying because it will lead to higher interest rates. Is this assuming that inflation will take off with the economy, which it appears to be doing with the report that inflation has jumped to an annualised level of 6% from last years 1.9%? Is it assuming that the brakes have to be put on?

With Oil being one of the largest contributors to inflation, will these levels of price rises continue? Can the consumer handle inflation or interest rate hikes? Stretched as they are, will a rise in interest rates, particularly mortgage rates, burst the bubble in the property market? Could it be that we are seeing the best now?

We reiterate that a strong economy in the U.S. will lead to the sucking in of more imports, so will the Trade deficit continue to rise overall, and undermine the credibility of the $ outside the U.S. as it has done in the past? Why are we not so positive on the economy as others, because we are aware of the underlying structural problems. For instance we have to ask why are the number of Americans filing initial claims for jobless benefits rising, to 360,000 last week, a 30,000 increase that was the biggest in more than a year?

We will look at these questions in the next "Gold - Authentic Money".

Gold rises, fundamentally and over the longer term, because the alternative measures of value decline in real value.

G.F.M.S. Survey.

With the publication of the very positive, G.F.M.S. survey tomorrow, we will be reviewing its statements and bringing its factors into the "Big picture" in "Gold - Authentic Money". Having respected their work for 35 years so far we feel their statements on the gold market are almost definitive.


The funds struck again! Silver tumbled down to $6.75. Our Subscribers who followed our advice are very happy at present, as they are on gold, because of our recent recommendations. The volatility will continue! The speculative funds are in the process of baling out of the market having built it up for so long. Sad to say these funds are driven like the waves of the sea by a need for both an ebb and a flow, from which they make their income. The underlying tide in Silver is not nearly as attractive as that in Platinum.

At the time of writing Silver was trading at $7.09 and looking anaemic, even after the bounce.


We are now clear on the short term situation for Platinum. Umicore's announcement on the Palladium catalyst will not be anywhere near sufficient to undermine Platinum's short term future. The latest price rises appear more than justified.

Irrespective of the fundamental situation regarding Platinum, the Rand [the South African Currency] is the central key to this market. We will look at Platinum closely in "Gold - Authentic Money" in our next or future issue. The funds are heavily invested in this market, but may well stay considerably longer than the very short term.

At the time of writing Platinum was trading at $927.

The London Gold Fix

Gold Fix 14th April p.m. $397.75   E 334.300
          15th April a.m. $398.00    E 333.333

- The gold price has fallen $29.25 against 12.14 Euros since our last issue! We continue to expect gold to walk a different road to both the Euro and the $ as the year develops! Goodbye to Rothschilds from the market, which drope to four market makers now!


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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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