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LAWRIE WILLIAMS: Gold price of $1,340 – Pass at your peril?

The upwards pressure for the gold price continues, but the powers-that-be look to have set its peak, for the time being at least, at around $1,340 and the dollar index at a corresponding low of near 90, above and below which respectively they shall not pass! 

Gold was booming yesterday, breaching the $1,340 level briefly which precipitated an almost immediate 2 million ounce dump of the yellow metal on the COMEX futures market and driving the precious metal price down to near downside resistance at the $1,325 level.  Silver too followed suit falling back below $17 an ounce.  Coincidence or what?  Similarly the dollar index decline was halted a little above the 90 level and was rescued by ‘gentle hands’ as Ed Steer puts it in his daily newsletter.  Ok, Ed is totally in tune with the GATA position that the gold price is being suppressed and the dollar supported, but more and more the evidence suggests that this position is not an unrealistic one.  Take-downs of the gold price, as yesterday, with what looks to be what has to be a totally unprofitable manipulation of the COMEX gold futures market designed to do just that, seem to be becoming more and more frequent as gold looks to be trying to break out to higher levels.

A higher gold price suggests a weaker dollar – or perhaps it is vice versa – and the mighty dollar does seem to be weakening.  The rumour that China was dumping dollar securities out of its forex reserve holdings appears to be fact according to the latest statistics and it also looks that Japan may be following suit. 

Trading this morning did seem to see the dollar index on the decline again and gold and silver prices were also picking up accordingly with gold back at $1,330 and silver heading back towards $17.10.  The question is will those seemingly intent on suppressing precious metals prices in the U.S. allow this trend to continue, or cap price rises once again? 

There also seems to have been some liquidation of bitcoin into gold, with former retracing almost 50% from its peak.  It does seem to be steadying at the moment – maybe some investors feel it is cheap and it will resume its meteoric rise.  Personally I don’t think so.  I have been a long term doubter on bitcoin and see it coming down a lot further this year even if there is a temporary recovery.

The big question now is will the current downwards pressure on the dollar (the dollar index has fallen by around 12% since President Trump’s inauguration a year ago.) continue?  If the dollar index falls below 90 then the dollar gold price may well rise fairly sharply – beyond the capability of the big money being thrown at the futures markets to keep the price down.  But in stronger currencies, like the Euro currently, the gold price is actually a little lower than it was a year ago so in Euro terms all it is doing is maintain wealth levels at best.  Even in the pound sterling, despite the Brexit decision, gold is only marginally higher than it was a year ago with the pound at its highest level against the dollar since the Brexit vote in 2016.

18 Jan 2018

About the author

Lawrence Williams

Lawrence (Lawrie) Williams is a well known London-based writer and commentator on financial and political subjects, but specialising in precious metals news and commentary. He is a qualified and experienced mining engineer having graduated in mining engineering from The Royal School of Mines, a constituent college of Imperial College, London – recently described as the World’s No. 2 University (after MIT).

e: lawrie.williams@sharpspixley.com

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