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Gold Forecaster #573: U.S. gold investors continue buying despite Trump’s statement that a new Tax regime is coming!

Shanghai returned last week and gradually gained momentum but only on one day did it lead the way, before President Trump said he was about to introduce a new fabulous tax regime and then the gold price faltered and fell $5 before falling another $10, before stabilizing and recovering to finish the week at $1,233.

Bear in mind that no physical sales of gold took place, but a small physical purchase happened in the Gold Trust last week in the U.S. 

What did happen was a High Frequency Traders raid on the gold price that involved no physical gold. 3,927 April gold futures contracts (paper gold) were dropped onto the COMEX gold market. This was 11.1 tonnes of ‘paper’ gold which hit the COMEX trading floor and electronic trading system in a 60 second window. The subsequent fall was not substantial, so we view it as primarily a response to a stronger dollar. 

What was important about the raid was that it had barely an impact on the gold price. Can we believe that such raids have lost their impact? It seems so!

The buying of gold into the U.S. based gold ETFs is persistent enough for the bullion banks to keep their books ‘long’ of gold. The potential for any shortage of open market stocks is great now, as the mood towards gold goes positive. So dealers and banks have re-positioned themselves for higher prices.”

Will the dollar move higher in the days, weeks and months to come. We know that the Fed and the Treasury as well as the government do not want a strong dollar. The ‘strong dollar’ policy is changing as the U.S. wants a globally competitive trade position in the world and a strong dollar goes against that. Hence, we see the rise in U.S. dollar and U.S. markets as being short lived.

Many may feel that with the U.S. raising rates in 2017 and a tightening of liquidity against a Europe and Japan loosening monetary policy will lead to a strong dollar. But we feel that until we can measure the impact of President Trump’s tax cuts and infrastructure spending, it is too early to conclude along those lines. As it is foreigners appear to have lost their appetite for U.S. Treasuries, so the U.S. may well rapidly increase its government deficits to provide such financing and move strongly towards adding liquidity to the U.S. monetary system…

 

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Gold Forecaster #572: U.S. gold investors are back and now joined by Chinese investors and Indian slowly coming back!

While Shanghai was closed for most of last week and we expected the gold price to fall as bears decided it was opportune to attack the gold price, nothing of the sort happened.

Instead gold crept up to $1,200, then, on Wednesday, U.S. investors returned to the gold market via significant purchases of SPDR shares [GLD]. This translated into over 12 tonnes of gold bought into the fund. Add to this a strong increase in ‘call’ option’ buying on COMEX and the change in tone towards gold in the U.S. was palpable.

At the end of last week the gold price was mounting $1,220 once again. On Thursday of last week in London it was ‘fixed’ at $1,224.05 and this in the absence of the Chinese gold investor and only slightly increasing gold demand in India.

Underneath the Gold Price

But the above are the weekly surface moves in gold. Underlying this are basic fundamentals like the decaying condition of the E.U. With Marie le Pen in the lead in the French Presidential elections and promising to take France out of the E.U. Italians could be in the mood to follow them.

Does this mean the euro has the potential to collapse and bring down the financial system? We doubt it very much. The ripples from such a crash would bring down the financial system. Central Bank euro reserves would be worthless. No we see the stronger members of the E.U. keeping the euro, so as not to experience the revaluation woes of the Deutschemark. In that case it would go stronger and hold its ground and ensure no collapse in the current monetary system….

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