Lawrence Williams

About the Author Lawrence Williams

Former CEO of Mining Journal Ltd. and subsequently General Manager of Mineweb.com - a position relinquished in October 2012 to continue as a freelance writer. Graduate mining engineer from London's Royal School of Mines (part of London University) - has worked on gold, platinum and uranium mines in South Africa, copper in Zambia, uranium in Canada and holds a South African Mine Manager's Certificate. Joined Mining Journal originally as Financial Editor and worked for the company for over 30 years spending 13 years as CEO. Particular follower of the gold and platinum market and has written numerous articles on precious metals for Mining Journal and Mineweb and has also written for London's Financial Times as well as for other media and publications including SeekingAlpha. Has been regular writer for mineweb.com - and now has own blog - www.lawrieongold.com as well.

Gold Price Currently Dependent on Dollar:Euro Exchange Rate

Dollar+Euro+Gold

With markets now on edge we are waiting for the dollar index to break above 100, or pull back. Worse still, the dollar is unlikely to do much if it holds below 100, just move sideways. But the importance of it holding current levels and not rising is enormous. As we say repeatedly, the U.S. suffers if the dollar gets much stronger and yet the E.U. wants the euro lower against the dollar. Further interest rate cuts into negative territory are expected in the E.U. alongside more asset purchases and the consensus of opinion among Fed Governors is growing for a December rate hike, so how can the dollar be held back?

The use of swaps between the E.U. and the Treasury has been the usual way to go and we expect will continue to be used in a larger way in the future.

We are still sitting on the edge of our chairs waiting for the I.M.F. announcement on the inclusion of the Yuan in the SDR scheduled for November. This may exert more upward pressure on the dollar as the Yuan then drops in value. It will not be a devaluation as the currency is ‘floating’, the same as most currencies do.  Then, we expect a gear shift in market turmoil as currencies across the board try to go lower, most against the dollar. Then we will see a more visible currency war!

There were sales of just over 4 tonnes of gold from the SPDR gold ETF yesterday but none from the Gold Trust. The holdings of the SPDR gold ETF stands at 655.692 tonnes in the SPDR gold ETF and at 160.27 tonnes in the Gold Trust. These sales seemingly had zero impact on the gold price as it continued to be dominated by the dollar: euro exchange rate and the dollar index. This pattern should persist today too.

We did see the attempt at another ‘bear-raid’ late on Sunday as Shanghai opened, as a major ‘futures’ sell-off happened. Yesterday’s physical sale of over 4 tonnes may well have been in support of this. It is noteworthy that there was no follow through in the gold price. While the futures markets are skewed to the downside and this bear raid produced only a small reaction, we have to ask the question, “Are we seeing a drying up of effective sales?” This is important.

 

  • Derick

    “The holdings of the SPDR gold ETF stands at 655.692 tonnes…”

    How reliable are GLD’s holding reports? GLD does not give retail investors the right to redeem for any of its mystery physical gold holdings. This fact alone ensures the GLD shares to be nothing more than paper at the end of the day. GLD also has a glaring audit loophole in their prospectus that states they have no right to audit subcustodial gold holdings. To this day, I have not heard of a single good reason for the existence of this backdoor to the fund. Some other red flags I’ve verified and welcome everyone else to do the same:

    “Did anyone try calling the GLD hotline at (866) 320 4053 in search of numerical details on GLD’s insurance? The prospectus vaguely states “The Custodian maintains insurance with regard to its business on such terms and conditions as it considers appropriate which does not cover the full amount of gold held in custody.” When I asked about how much of the gold was insured, the representative proceeded act as if he didn’t know and said they were just the “marketing agent” for GLD. What kind of marketing agent would not know such basic information about a product they are marketing? It seems like they are deliberately hiding information from investors.

    I remember there was a well documented visit by CNBC’s Bob Pisani to GLD’s gold vault. This visit was organized by GLD’s management to prove the existence of GLD’s gold but the gold bar held up by Mr. Pisani had the serial number ZJ6752 which did not appear on the most recent bar list at that time. It was later discovered that this “GLD” bar was actually owned by ETF Securities.”