Gold - The Weekly Global Perspective

By: Julian D. W. Phillips | Sun, Aug 14, 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.

Features: -
- Market Action / Short-term forecasts across the Board!
- Comex positions/ Commercial Shorts Help Indicate Price Movements
- The four main gold price drivers at the moment?
- Athabasca Oilsands.
- 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": -

As we forecast, the gold price has broken out earlier than usual this time of year, normally the "Doldrums" for the gold market. There are good reasons for this! This half of the year will not be a simple case of upward only.

Here are two of the four main fundamental points driving the gold price in the short term [they must be taken in context with the other information we present]: -

1) The C. B Gold Agreement: - 500 tonnes gone before the end of the C.B.G.A. year?

From John Brimelow came reports of sales of around 20 tonnes, seemingly from Spain. This left around 33 tonnes remaining from this year's 'quota'. This week came this news: -

The National Bank of Belgium hereby announces that it has sold 30 tonnes of gold during the months of July and August. These gold sales took place within the framework of the gold agreement (the "Central Bank Gold Agreement"), which was concluded between 15 European central banks, including the National Bank of Belgium, on 8 March 2004. The reduction of the gold reserve will enable to increase the yield of the Bank's assets.

If John Brimelow's numbers are right, then there remains only 3 tonnes left of this year's C.B.G.A. sales of gold, to last from the middle of August to the 26th of September! The monthly average of gold supplied by the Central Banks is 41.67 tonnes [500 tonnes over 12 months], then the market is without 45 days worth of its budgeted amount. More importantly this was sold when the gold price started to 'spike'. With this no longer there we should have a cracking second half of August / beginning to end September! Add this to the other positive factors for gold and we should have quite a bull charge start to the post-holiday gold market.

But will the C.B.G.A. hold to their agreement? Whatever the Central Banks do now will show their true hand and we will see it in the gold price.

By the way, the Bank of Belgium intended, they say, to increase their yield through the assets they bought, was it the U.S.$ or the ? We were not informed. As we saw this week, the fall in the U.S.$ was close to 3%, only 1% or so off the yield the bank will make for the entire year. If they purchased the , they tell another story as that, like gold, rose the percentage the $ fell. But to switch out of gold for 2%?? But still they would have avoided the $? So, from a reserve management not too much good investing was carried on in this deal.

3) Indian Market makers - gold stocks low and falling!

Last week we highlighted the absence of Indian manufacturers and stockists from the market. The Indian market, with their unwillingness to pay prices they feel too high until the market has consolidated, has moved into a precarious position. Their dislike of paying more than they have to is extremely strong, to the extent that they will hold off until convinced that prices are going to hold.

Right now they have been holding off since the gold price was below $420 and are still out of the market, unable to accept prices at the current levels, yet. As prices started to rise the heaviest of the rains came and disrupted the gold market, so keeping buyers out as the prices rose.

If prices hold at these higher levels, the Indian buyers will come back to the market and pay up for their gold to give them stock for the Festival season too.

The same happened previously last in November / December 2004. At that time they held off buying, despite good Deepavali 2004 sales, expecting prices to pull back to below $420 when the gold price was around $435. When it did not pull back, they rushed into the market paying cutting their losses at $451 - $453, very close to the peaking of the gold price. When the gold price then fell to its low in the middle of February 2005 they built up their inventories again.

As in the developed West and Europe, individuals in India believe their market is controllable by their market. They believe that patience and holding off from buying will lead to lower gold prices, sooner rather than later. It does too, provided they are the dominant force in the market, but gold is a global market, an amalgum of markets and influences from currencies to uncertainties, to simple demand and supply, making gold price forecasting far from simple. Now the market is bursting up again, they find themselves getting shorter and shorter as their stocks dwindle. They are still holding onto the hope that they last had when they bought with vengeance as prices came down to $411 in mid-Feb. 2005. But do they have the right perspective to get it right in the future?

The Indian market appears to ignore Technical Analysis, the forecasting of prices by past patterns of prices. Whilst in a global market with changing fundamentals Technical Analysis alone is far from reliable, but combined with fundamental analysis with global insight and perspective, it can greatly assist in improving on the buying performance described above.

Perhaps they should subscribe to this publication?

The pent-up demand spawned by this situation is bound to give a tremendous upward impetus to the gold price, when the dam breaks!

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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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