Gold - The Weekly Global Perspective

By: Julian D. W. Phillips | Thu, Oct 7, 2004
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That was the week that was!

The calm market that held sway through the summer broke down during the last week and saw gold break upwards, as expected. And as we at "G-AM" boldly warned you it would. But since then the price fell back, turned back at $419, as we warned in our publications, to fall back to a low of $411.50. Then came the recovery, taking it through $420. Right now it is around the $417 $ 418 level. We are told it is waiting for the Jobs data out of the States, due out tomorrow. The market is looking for a 150,000 job figure, which looks like being optimistic. A higher figure will be positive for the gold price in the States and a lower figure will be negative for the $ and good for Gold and the Euro.

But the perception that this drives the gold price entirely, should be readjusted. It is the New York bullion market that is waiting for the jobs data tomorrow, for it looks like London and the Gold fix has been setting a good deal of the pace. Take a look at the Euro price of gold, currently Euros 340+. This is a good rise on the week, encouraged by the record oil price, now over $52 a barrel. It appears that gold is walking its own road in Euros, a reality we have been pointing to for months. Yes, it is moderated by the Euro / $ play, to a large extent, which accounts for the very short term moves, but it is rising in most currencies. As we said last week, this is most likely supply shortfall, rather than rising demand at this stage.

The most remarkable feature of the recovery in the price was that it was driven mainly by physical demand, which has moved on from the $405 level to $410+ level. Having accepted it there we would expect them to keep buying around that level from now on.

The funds, having precipitated the breakout above $410, turned sellers at $419 taking the gold price a heady drop to $413, triggering "stops" on the way, then falling again, down to its week's low for at $411.50. The funds dumped the positions built up at the end of last week, as the Euro fell. Dealer book squaring and physical buying emerged at above $410, which held gold up around $413.75. Thereafter, two way trade kept gold in the teens above $400. Support came from a recovering Euro and a morale boost was added by the oil price rise sparked by the realisation that U.S. supplies will see a longer disruption than originally thought. Now it is in a battle just before another assault on the $420 level, but just how long will that battle last?

Short term prospects for the price: The speculative funds will keep playing the Euro / $ moves and translating them in to gold price moves, but real Investors and perhaps physical buyers will keep their eyes on the Euro price of gold, and a watchful eye on the oil price.

Will Bush release oil from the U.S. strategic stockpile to gain more votes, or will the government's eyes be focussed on the long term crisis in oil in a year and more. For sure this market is looking a lot stronger than the Technicals indicated. The fundamentals are coming into play forcefully now and have ruptured the calm of the market we saw throughout the summer. And now the gold price is building an ever stronger base, day by day. But there is room for a pullback still. We give specific targets to Subscribers.

At the time of writing gold stood at $418.1 and Euros 340.28. The Euro itself is worth $1.2287.

Large Scale Speculators.
Long term speculators jumped into gold last week, ahead of the G7 / I.M.F. meeting, taking the speculative long position up just under 60 tonnes. With the Technical level of $404 being breached, Long term speculators jumped into gold last week, ahead of the G7 / I.M.F. meeting, taking the speculative long position up just under 60 tonnes. But on Friday [1st October] this figure was taken up another 93 tonnes to give us a total of 473 tonnes This is approaching the higher levels seen in these positions this year, which went to 610 tonnes at one point. If they came in on the back of the Euro, then they got out just as quickly as it fell on Monday. These particular speculators appear to be riding every move of the Euro. Now they are going in, again!

Silence from the G7 / I.M.F. meeting last weekend.
Silence can mean so many things. In this case it meant that the G7 wanted no disruptions to the gold market. Mr Brown, Britain's Chancellor of the Exchequer, who is not known as "Mr Gold", threw us all a "red herring" in the form of his proposal to have the gold of other nations, held by the I.M.F., revalued from the $40 region to the market price of $400+ and give the other nation's "profit" away to pay away poor countries debt. Easy to do when its not your money, isn't it.

This kept the eyes off the nations who were expected to make announcements on their gold sales, or lack of them. Bearing in mind that Central Bankers will only make announcements in such a way as to cause the least disturbance to the markets, their silence on this matter can only be taken as remarkably positive for the gold price. We posted an article called "Central Bank Gold Sales to Cease" recently. To get a FREE copy of this article and to be added to our mailing list, send us an email requesting this, at the email address above.

The Switch from the $ to the Euro and the collapse of the $?
We do not believe that nations holding the bulk of their reserves in U.S.$, including China, will precipitate a collapse of the $! But it is very possible that the $ will be made to collapse, but how? Why do we believe this? Because of the evidence in front of us, right now. The subject will be covered in the present and future issues of our newsletter, "Gold - Authentic Money" in full. The evidence is overwhelming. The world is moving rapidly down a degenerating path globally, which history has walked many times before, even relatively recently. We are far further down this road than virtually all commentators realise. We are perhaps the first newsletter to cover this subject, with this evidence.

The Oil Price stays up
With a +$52 oil price now in the market and question marks over the speed with which oil supplies can be increased, the head of The Organization of Petroleum Exporting Countries, Purnomo Yusgianttoro, expects U.S. President George W. Bush to release more crude oil from the nation's emergency stockpile to lower prices and win votes in next month's election. Whilst this will bring oil prices down and oil related prices with it, it is unlikely to keep oil prices down for long. The myopic political expedient may cost the next administration more kudos, than the votes it achieves. No doubt when these supplies are closed off, the oil price will run back up again to higher highs, still! This will certainly test the relationship of the metals supposed to move with the oil price. Will the gold price fall with it, then rise after the election? In the next issue of "Gold - Authentic Money" we examine the future of the oil market to show the dramatic looming battle for oil, globally.

India's satisfactory harvest points to good levels of gold purchases this year.
Despite India's monsoon rains, which fell up until Sept. 30 being 13% below normal levels, India's summersown, [rice, maize and pulse] crop is expected to be only 2 million tonnes lower at 100 million metric tons compared with last year, a less than 2% drop. These crops are sown from June to August and harvested in September and October. India's monsoon rains, which run from June to September, were patchy and erratic this year after welldistributed and ample monsoon rains in 2003. But the good news is that, according to government, rains across India in the last few weeks of September may brighten the prospects for the wintersown crop, which will start to be planted in November. India's largest wintersown crops are wheat and mustard seed. The farm sector accounts for around a quarter of India's gross domestic product. It also accounts for a substantial portion [approx. 70%] of the gold buying of India, which values gold as money and measures their wealth by it.

This bodes well for the continued physical buying of gold on the open market for the next six months and more.

Mugabe back tracks just a little.
Draft regulations issued by the Zimbabwean government on the indigenisation of the Zimbabwean platinum mining sector propose that 20% of Zimbabwe's platinum mining sector be owned by indigenous concerns within two years, a further 5% within seven years and a total of 30% within 10 years. It is with baited breath that we wait to see just which indigenous people, get to own these share and with what will they pay for them? No doubt it will be with Zimbabwean $. In 1980 1Z$ was worth 1U.S.$. Today, 1Z$ is around .0015U.S.$ and still falling.

Silver $6.78
The net long speculative position on the Comex silver contract at the close of trading last Tuesday was a modest 257Moz - compared with a 12 month low of 219Moz and a 12 month high of 436Moz. Then in came the funds to play the Technical picture and take the price way over $7.10. The news on the photography front is not good and getting worse, with all convinced that digital cameras are taking the market. So what is going to fill that hole? With the ability to extract the silver from the developing fluid, all that silver has to return to the market at some stage?

Platinum $855
with strike action still continuing at South African producers Anglo and Impala we could start to see some action in the forwards, with shortterm liquidity being squeezed. The strike looks like continuing for a while with strikers being shot with bird shot and rubber bullets. All this should have led to a rise in the Platinum price, but its relationship with the Euro dominated market action. The price pulled back alongside the Euro. Then Investec Bank came out with a report saying it expected demand to fall. Why, because of an expected fall in the car demand market. What happened to the recovery you may say, what about the 10% increase in car sales in the States in September? The only way the Platinum market can drop off, is if the demand for cars drops and heavily. Deflation? End of growth? Maybe its time for inflation to deflect deflation?

The London Gold Fix
7th October a.m. $417.90   E 340.172
7th October p.m. $418.10   E 339.919

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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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