Making the most of declining junior miners
Miners are underperforming gold despite getting support from the stock market.
Gold Today – The New York gold price closed at $1,366.20 down $15.40 on Monday in New York. Asia took it down further to $1,360 ahead of London’s opening. The gold price was Fixed in London at $1,362.50 down $16.50. In the euro, it Fixed at €979.370 down €13.002 as the dollar continued to weaken to $1.3912: €1. Ahead of the opening in New York gold stood at $1,362.75 and in the euro at €980.40.
Silver Today – The silver price closed at $21.13 down 28 cents in New York. Ahead of New York’s opening, it was trading at $21.05.
Gold (very short-term)
We expect the gold price to consolidate, today in New York.
Silver (very short-term)
We expect the silver price to consolidate, today in New York.
Price Drivers
The gold price was about to begin building strength before tackling $1,400, when it was hit by a 3.817 tonne sale out of the SPDR gold ETF. The Gold Trust saw no sales or purchases, so this left their respective holdings at 812.776 tonnes and 165.14 tonnes. While this was not a very heavy sale, it took place as new buyers were hesitant to move in just ahead of a consolidation before $1,400 was taken on. As a result the gold price was vulnerable to a pullback, which we are seeing now. We note that the gold price is now close to support, which is a good entry point for us. The U.S. dollar is not any stronger or weaker at $1.3931: €1, it is standing at the bottom end of its ‘unofficial’ trading range, just above $1.40: €1 which is very weak overall. We would expect intervention from the Fed/E.U. below $1.40: €1. This makes the euro price of gold more reflective of its underlying demand/supply in the days ahead. [For more on this, subscribe to www.GoldForecaster.com and www.SilverForecaster.com and visit www.StockbridgeMgMt.com to hold gold out of reach of potential confiscation]
With minor sanctions being imposed on certain individuals in Russia/Ukraine/Crimea the threat of major sanctions appears now to be empty. Hence the crisis is likely to be gold neutral.
There are market rumors and evidence that China and perhaps Russia are dumping U.S. Treasuries in favor of euro assets. In the week to Wednesday 2nd March a huge $104.5 billion was unloaded. We need to wait to see it there is follow though in subsequent weeks, before we can see just what is really happening. However, line up the depreciating Yuan, the falling dollar and the potential damage to the dollar with the Yuan coming into the group of global reserve currencies and we have cause for concern that this is really happening. It was thought to take a few more years for the Yuan to be freely convertible, but the Chinese operate their own timetable. It could be closer than most think!
The Shanghai premium on gold is now a discount. This is not to say that the demand for gold in China is waning, not at all. The demand is only relatively price sensitive. It is driven by the structural growth of the Chinese middle classes. This is a generational process that the Chinese government is deeply committed to.
Silver – The silver price is following gold with slightly less enthusiasm today.
