New York closed with the gold price at $$1,168.10 up from $1,162.40 yesterday. In Asia this morning gold rose to $1,173 ahead of London’s opening. London then pulled it back to $1,164 ahead of the LBMA price setting. But physical demand dominated and the gold price was set at $1,173.70 today up from $1,154.40 at yesterday’s LBMA morning gold setting. The dollar Index was almost unchanged at 94.65 from 94.76 and the dollar was trading against the euro at $1.14070 down from $1.1390. In the euro the fixing was €1,029.11 up from €1,013.35.  Ahead of New York’s opening gold was trading at $1,167.00 and in the euro at €1,022.97.

The silver price closed at $15.90 up 5 cents over Friday’s close. Ahead of New York’s opening, silver was trading at $15.86.

Price Drivers

Now we have the convincing breakout we were waiting for as Asia and London lifted the gold price over $1,173. We disclose our new targets in our newsletters.

On the U.S. physical side, we saw no sales or purchases into or from the SPDR gold ETF but a relatively large 1.09 tonne addition to the Gold Trust. We say large because it was nearly a 1% addition to the Trust. The holdings of the SPDR gold ETF remain at 687.196 tonnes and 161.71 tonnes in the Gold Trust.

We seem to be a lonely voice that is negative on the dollar exchange rate going forward, but are borne out by a dollar that has fallen back from its peak of $1.07 to $1.14 today! This is adding to higher dollar gold prices.

A new piece of information that will affect the global economy came out yesterday, from the IEA on the oil market. They see an oversupply situation remaining in the oil market well into 2016. This may keep inflation low [and delay rate hikes still further?] but will put savings into the consumer’s hands across the world, if these prices feed through to the consumer. In many countries where exchange rates on the local currencies have fallen heavily, it won’t, but will ease the burden of weakening currencies. If rate hikes are postponed further, so will equity & bond bear markets. But it solves no global monetary problems.

The attack on ‘Frackers’ in the U.S. through ongoing low oil prices continues and will until that production is lowered heavily. In addition the Shi’ite oil producers will see Iranian oil come onto the market to put more downward pressure on the oil price. The Sunni producers [Saudi Arabia and producers on the west of the Persian Gulf] will continue to keep production as high as they can as part of the ongoing antagonism between the two sides of Islam. So low oil prices are here to stay.

Silver will likely rise with the gold price through the $16 area.