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LAWRIE WILLIAMS: Gold and Silver surge as dollar drops and GLD takes in more

The surge in the gold price, followed by that of silver, which we saw at the close of last week has continued this week as expectations of a US Fed interest rate rise in September fade – and indeed many analysts are questioning whether the Fed will raise rates at all this year, despite flagging three or four increases in 2016 at the end of last year.  The US and Global economies are just not performing as the Fed expected back then, with the unexpected Brexit vote adding to uncertainties.

The latest US GDP growth figures, which came in hugely below expectations, have been the latest trigger for the rising gold price.  The dollar index has slipped, general equity prices are off and flows of gold into the big gold ETFs, which looked to have started to have turned down, are back on the up again.  For example the latest days for the biggest gold ETF of all, SPDR Gold Shares (GLD), have seen inflows of a little under 4 tonnes on Friday and a fraction under 6  tonnes yesterday.  We would anticipate another good increase today with gold surging to well above $1,360 as I write while Asian stock indexes were down overnight and European indexes are trending downwards today too.  We anticipate the DJIA, S&P500 and NASDAQ all opening lower today as well.

While the northern summer months often see precious metals prices in the doldrums, this year they have seen first consolidation of the gains made earlier and now precious metals appear to be surging, although there’s always the possibility that the big money behind some of the massive short positions on the COMEX may try to drive prices back down.  But such take-downs may be running out of steam.  As I write gold is trading at over $1,364 – its highest level for just under three years - and silver at $20.70 – its highest for over 2 years.  And the momentum appears to be upwards, but with US markets not open yet these could signify all-change, although given the significance of some recent key US data, we don’t see this as too likely, at least in terms of any significant downturn.

Interestingly analysts across the board are leaping on the bandwagon to predict higher and higher price levels for gold to be achieved this year.  Even Jeffrey Currie of Goldman Sachs, who was urging clients to sell gold short at around $1,200 back in February, and had been predicting a fall in the price to around $1,000, or perhaps even less, has now put a base price into gold of $1,300.  Quite a turnaround for Goldman’s commodities guru who had been ultra bearish on gold and gung-ho on the US economy for the past couple of years at least.  Goldman is now recommending clients should buy gold as a hedge against market uncertainty.  And we certainly are seeing an ever-rising degree of market uncertainty out there.

02 Aug 2016 | Categories: Gold, US

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