Gold - The Weekly Global Perspective

By: Julian D. W. Phillips | Thu, Jun 17, 2004
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That was the week that was!

The market looked as though it was going to tumble as the prospect for aggressive interest rate hikes grew. Then the publication of low core inflation rates calmed the market, made them realise threat the U.S. $ interest rate levels were not sufficient to make the $ strong. Gold rushed to recover to the high $380's. But the $ did not fall that much and gold began to retreat to the mid $380's. Against the Euro it has begun to 'exaggerate' the moves dropping to E316 at the low and rising to E322 at the high, against a two cent move of the Euro against the $. Why? Because that's what the main gold price movers of the moment have decided. Ask yourself, what qualities does the Euro have that make it and the gold price stick so close, at the moment? Volumes are not heavy, so current prices are not reflecting the overall opinion of all market participants. With many players in the fields tending to their crops, jewellers waiting for the fourth quarter high season and Investors moving in and out when volumes of gold come into the market, the present picture is far from complete.

The market is presently being made in the U.S. with London exerting a weaker, seasonal influence. The physical and investment players are there, but move in on weakness, intending to follow the price not lead it.

At the time of writing gold stood at $387.60, and Euros 321.71. The Euro itself is worth $1.2048.

At "Gold - Authentic Money" we find that many in the gold market are surprised at how broad and extensive the influences on gold are and how deep the factors shaping the gold market are. We try not simply to fill the picture, so as to assist our subscribers, but invite questions from them so that we can help and teach directly. We want to be direct in our usefulness. Hopefully, we can teach all, from beginners to professionals. In the next issue we conclude our series on "What drives the Gold price". The conclusion will tie the parts of the gold price make-up into an interactive piece of knowledge, which should help you to understand the ebbs and flows of the gold price more fully. Following this in the subsequent issue, we examine the French position on Central Bank sales as well as link it to German sales, to expose a "Hidden Agenda", still further.

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Which way will the gold price go now? Are interest rate rises going to suppress it? Is the $ going to be strong? How will the oil price / inflation / Terrorism / and the global economy going to impact on the gold price from now on? To find out and get this information, what must you do? - Subscribe to Gold - Authentic Money or one of our Technical services - "Changing Tack" or "Changing Tack - Gold & Precious Metal Shares" quickly!

Exchange Traded Funds - Gold Bullion Securities.

The processing of the application by the NYSE of the World Gold Council Gold Bullion Securities, Exchange Traded Fund drags on, but a response, hopefully approval, must be imminent. If we compare the demand enjoyed in the U.K. and Australia with the potential in the States, we could see well in excess of 250 tonnes demand within the first few months following its issue. One share in this ETF equals, constantly, one tenth of an ounce of gold. It is an the closest and the cheapest way to benefit from the gold price movements, without actually holding the metal. Yes, the holding of metal is a protection against the worst economic disasters, including bank failures, but it is more than likely that the gold price will rise significantly before that happens. With the speed of converting these shares to cash, one would have time to sell the shares and buy gold ahead of such disasters. With the ability to trade these shares 24-hours a day, once they are established in the three centres [Australia, the U.K and the U.S.A.] we see these shares as cheap, trouble free way of profiting from the gold price. Now re-designed to be attractive to pension funds and other institutional holders, demand will grow as the shareholder profiles extend.

But the most significant impact of this share will be the demand for physical gold it will produce. We are of the opinion that the demand for physical gold could overwhelm supply at these price levels. The 200+ tonnes of completely new demand will drain off supplies when it arrives in the market place. What will this amount do to the finely balanced levels of demand and supply. - Watch this space!

Large Scale Speculation.

A fall last week of 8 tonnes in the net large scale positions was recorded. Not a significant feature on the market and most likely a result of the Technical picture for gold. Certainly dealers are prone to favour the downside at the moment in gold products. Taking a look back at the action of large scale speculators, we may be tempted to assume the their actions in accumulating and holding gold for such an extended period was simply to speculated when it was cheap to do so. There would have been many in the "carry" trade who did so, but many seem to have held this way as it was the cheapest way to do so. Once interest rates rose, they felt a direct holding of stored bullion met their requirements better, so switched to the physical purchase and hold?

For now it would appear that this will not be the chosen route for Investors to follow. Pure speculators are deterred by the cost of doing so, so have we seen the last of these gentlemen in the gold market, for the meantime? The figures point to that.

"Hello Kitty"

A strange partnership indeed, Queen Elizabeth the second partnering "Kitty" a popular cartoon cat in Japan. One enterprising company, Taisei Coins Corp., has used the popular cat to grace one side of 1,000 one ounce gold coins and 2,000 quarter ounce gold coins. 5,000 one ounce silver coins will also be minted with the two faces on them. So how did the Queen get there? It seems her inclusion was due to the coins being minted on the Cook Islands in the South Pacific. We would venture to guess that her august presence also lends a dose of respectability to the cat, who comes adorned in one of six different kimonos, each representing a heroine in a classic kabuki play. With so little gold involved, why do we mention this? It highlights the ongoing need for the marketing of gold to stay up to date. Gold is value when all else fails, a depressing prospect, but when presented as true value in a 'relaxed' setting, becomes attractive to two generations who have not tasted the "when all else fails" scene. As global interest rates are pointed up in response to the re-awakened prospect of inflation, such presentations introduce gold's value concepts to new markets beautifully.

Interest Rates in the global economy as they effect gold.

Oh, we hear so much talk of U.S. interest rates rising, we are in danger of being somewhat parochial. In fact interest rates the world over are set to rise. As gold reflects a global picture, not just a U.S. one, what does this mean for exchange rates. Surely, if rising rates send the $ higher, they will do the same for other currencies. It seems as though they 'act in concert' to some extent. This neutralises currency effects on gold surely, you may ask? Well, have a look at inflation. It just is not good enough to dismiss energy and food prices from inflation figures and focus just on 'core' inflation. Inflation is inflation, it hits all of our pockets, core or not. What is for sure, is that if interest move globally, so will inflation, so will oil prices and so will other consequential price rises. Is there a global Fed that can control money supply, inflation or interest rates? I can't see one, so national interests are likely to barge into one another, to the benefit of gold overall.

Silver - $5.80

This metal is showing that it is following the gold price, but the news on the photographic uses of silver is turning bad. How long will it be before this damages the price? Until then it is looking more volatile than gold it seems? But the demand from commodity markets in general could well compensate for any drop from this sector, perhaps?

Platinum - $795

Platinum did not fare as well as gold this last week, but is holding its levels in the upper $700s. The markets currency plays are market made not a reflection of the state of the Platinum market, so keep your eyes on currencies as well. One thing is for sure. China with a quarter of the world's population and undergoing financial empowerment and broad growth will keep the commodity prices right up there for a long, long time to come. As the leading gold producers are saying out loud, it's a good time to be in metals. And they are putting their money where their mouth is!

The London Gold Fix

Gold Fix 17th June a.m. $386.00   E 320.590
            17th June p.m. $386.10   E 321.429

Gold acting better then the Euro, up two Euros and two $ on the week!

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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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