Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold Price Trend Like Watching Paint Dry...

Commodities / Gold and Silver 2014 Aug 01, 2014 - 10:13 PM GMT

By: Alasdair_Macleod

Commodities

That was how it felt watching all markets this week until yesterday when they sprang into life. Gold fell from $1304 at the London opening last Monday to a low point of $1281 yesterday, down 1.8% on the week, while silver fell from $20.60 to $20.35, down only 1.2%. These moves were relatively small compared with action elsewhere. Here are the charts showing price and open interest for gold and silver on Comex.


Note how Open Interest in gold has collapsed by nearly 49,000 contracts since the peak on 10th July. This is principally due to the August contract winding down, with only a portion being rolled into December. Silver's OI on the other hand has held up relatively well, and its performance relative to gold has been remarkably strong.

In both cases the swaps category, which is mostly foreign banks, has recently accumulated large short positions. It will be interesting to see to what extent these positions have been closed down when the Commitment of Traders Figures for the second half of this week are released next Friday.

Precious metal markets weathered two important announcements on Wednesday. First, the Fed's FOMC completed its two-day meeting, and unexpectedly one committee member, Charles Plosser, dissented from the agreed statement in more hawkish tones. And secondly, the first estimate for Q2 GDP at 4% annualised was significantly higher than market expectations, as if to drive Mr Plosser's point home.

The impact of these developments was dramatic, sending the dollar higher against all currencies, but most notably the yen. Bond yields rose from recent lows, and equities fell sharply with a 300-point fall on the Dow yesterday. Less rationally commodity prices fell, with WTI crude falling through the $100 level to $98. So it is hardly surprising that gold and silver were marked down along with everything else.

Much of the fall was in US trading hours, so was a paper-driven gut reaction, and coincided with end-of-the-month book-squaring. It will be interesting to see if over the course of today physical demand for precious metals returns in London at these lower prices.

We may find in retrospect that this week was pivotal. China's equities were sharply higher (up over 7% since 21 July) on recent PBOC moves to ease liquidity strains, and the Japanese yen has started falling again having failed to break the ¥101 level. This may signal a return to the yen's bear market, which would be consistent with Japan's economic fundamentals. This being the case we can expect yen carry-trades to profitably finance global bull markets for the foreseeable future. It should also rekindle Japanese demand for gold.

Next week

Monday. UK: Halifax House Price Index. Eurozone: Sentix Indicator, PPI.
Tuesday. Eurozone: Retail trade. US: Factory orders, IBD Consumer Optimism, ISM Non-Manufacturing.
Wednesday. Japan: Leading Indicator. UK: Industrial Production, Manufacturing Production. US: Trade Balance.
Thursday. UK: BoE MPC Rate Decision. Eurozone: ECB Deposit Rate. US: Initial Claims, Consumer Credit. Japan: Bank Lending Data, Current Account.
Friday. UK: Construction Output, Trade Balance. US: Non-Farm productivity, Unit Labour Costs, Wholesale Inventories. Japan: BoJ MPC Overnight Rate.

Alasdair Macleod

Head of research, GoldMoney

Alasdair.Macleod@GoldMoney.com

Alasdair Macleod runs FinanceAndEconomics.org, a website dedicated to sound money and demystifying finance and economics. Alasdair has a background as a stockbroker, banker and economist. He is also a contributor to GoldMoney - The best way to buy gold online.

© 2014 Copyright Alasdair Macleod - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Alasdair Macleod Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in