Gold - The Weekly Global Perspective

By: Julian D. W. Phillips | Sat, Aug 6, 2005
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HIGHLIGHTS in "Global Watch - The Gold Forecaster"
Silver - COT, Gold : Silver Ratio EDR.V, SSRI, PAAS, SIL, HL, CDE / Platinum.
SHARES: HUI, NEM, FCX, GFI, HMY, DROOY, NG, VGZ, GSS

Features: -
- Market Action / Short-term forecasts across the Board!
- Comex positions/ Commercial Shorts Help Indicate Price Movements
- The future of De-Hedging to 2006?
- Indian Physical demand - Where is it?
- The U.S.$'s Place in Global Reserves.
- The Oil price is breaking up with Supplies at or near their peak!
- Prospects for the U.S. $/ Prospects for the US $ Short & Long-Term
- DJIA / 10-Year Bond / CRB / Gold : Oil Ratio - Record Lows.
- Summary: The present Gold Price Drivers.
- Technical Analysis of the Gold Price: Long/Short term in the U.S. $
- International Gold Markets / Focus on Euro, Euro Gold Price.

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Excepts from the "Global Watch - The Gold Forecaster": -

The Indian physical Gold demand - Where is it?
The Indian market is behaving very strangely at the moment. During the period when the farmers are in the field, manufacturers and stockists build inventories particularly when prices are 5% to 10% down from their highs. But not this year! Gold imports through Ahmedabad have fallen to .2 of a tonne a day from peak buying of 1,2 tonnes. In Mumbai, buying is down to .1 of a tonne from an average of 1.0 tonnes. As they are extremely sensitive to their perceptions of prices, so buy if they believe prices are low and hold off until they have to buy, if they believe prices are too high ensuring that prices look sustainable.

To date they have felt that $420 is a low price to pay, but over the last few weeks have been virtually absent from the market. Now ahead of the festival and marriage season, which starts with the festival of Rakshabandhan when brothers give jewellery and cash to their sisters, they have been handicapped by rain and now rising prices in the market.

So we are all waiting and watching to see what is next? You can be sure that they won't stay away for long. If they have taken a position, effectively 'short' of the market, they are going to have to go in to get stock with a dash of speed, at higher prices. Or do they believe prices will fall? If prices hold these levels for any time, then the Indian market will accept them and enter the market as buyers. Thus physical demand will pick up enormously from the middle of this month or so.

The globe depends less on the U.S.A.

We don't have to wait for China to take top place in the globe's economic ladder the mere fact that it is a rising global economic driver is changing the global economic structure. The world if fully aware that the Far East is developing as a bloc with China at the centre, despite Japan being the second largest economy in the world. The Eurozone has developed its own degree of self-sufficiency that makes it far less dependent on the States for its exports. The spread of global influence to these additional economic blocs has reduced the influence of the States over the global economy. The transition is slow but steady and will lead eventually to the States standing alongside, if not one step behind the States in global economic influence. The role of its currency has to reflect this change. So rather than looking at the State of an economy for its influence over its currency, one has to look at its Balance of Payments. A nation that through 'floating' its currency down in the case of a deficit, in the hope of balancing its international books is fooling itself as well as all others. The very piece of history we are seeing of the $ weakening over the long term will have to reflect this only in part, because its creditors need to help the $ to retain its value by re-investing those $s back in U.S. investments, thus negating this effect.

A far greater influence we will see from now on is the growing disenchantment of the creditors of the U.S. with the $ as a means of holding surpluses. In direct trade with the U.S. this is unrealistic of course, but in their dealings with other countries, the choice of currency can be changed, as we believe is the case with China and its selection of a 'basket of currencies' for its exchange value. The announcement of Russia that it will drop its target level of the $ in its reserves from 65% to 60% is a continuation of a process announced earlier this year by the likes of Korea. The fact that the States is not behaving as a Debtor should, is already making the present level of U.S. interest rates suspect as a means of valuing the $. How high would you accept as a reliable interest rate level from a Debtor with a poor repayment level before you called in the debt?

The use of the $ as a global reserve currency is falling and may well prove to be a heavy source of inflation inside the States in the future! For this reason the Fed will likely keep increasing interest rates.

SIZE OF U.S. TREASURY MARKET AND FOREIGN HOLDINGS:

May '05 Dec '04 Dec '03
1. Japan $686 $712 $584
2. China $244 $194 $157
3. UK $133 $164 $ 94
4. Caribbean Centers $126 $ 69 $ 55
5. Taiwan $ 71 $ 59 $ 53
6. OPEC countries $ 63 $ 60 $ 43
7. Germany $ 61 $ 54 $ 48
8. South Korea $ 59 $ 69 $ 60
9. Hong Kong $ 53 $ 53 $ 54
10. Luxembourg $ 45 $ 41 $ 26
(Sources: International Monetary Fund, Bank for International Settlements, Organisation for Economic Cooperation and Development, U.S. Treasury, U.S. Federal Reserve, national central banks, Reuters news)

You will note in the Table above the emboldened items, showing surprisingly Japanese holdings of U.S. Treasuries dropping between December 2004 and May 2005, as was the case with, again surprisingly the U.K. and as announced Korea. What is significant is the increase in the holding of these Treasuries by the Caribbean Centers who not far off doubled their holdings. We have believed that these are funds holdings, as they have proved a profitable investment, but could it be also a way of mopping up international liquidity, by those with distinctly nationalistic intentions? Certainly this picture shows a move away by foreign nations [the Caribbean Centers do not hold treasuries on behalf of Nations] from U.S. Treasuries.

We shall be following these Tables as and when new information comes to light!

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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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