Our first report for 2016 saw the New Year get off to a troubled start, but not for gold and silver. As we expected the gold price rebounded after dealers and speculators tried to shove it down during the holiday period. It was trading in China at over $1,069. London took it higher and we expect New York to do so as well. The last week has seen no sales from either the SPDR gold ETF or the Gold Trust. The holdings of the SPDR gold ETF are now at 643.558 tonnes and at 153.21 tonnes in the Gold Trust.

The religious war in the Middle East took another step to intensity when Saudi Arabia and Iran broke off diplomatic ties between themselves after the execution of a Shi’ite cleric. We expect the sectarian war in the Middle East to go from bad to worse in 2016, but will not affect the gold price in itself. With Saudi Arabia doing its best to supply China, Iran’s top client, the issue for gold in oil is whether the Saudis will accept the Yuan in payment for oil?

We do not expect to see a stronger dollar than seen at its peak in 2015, while expecting the interest rate hike certainties to fade as the recovery does not do as well as expected in the U.S. in 2016. However, our focus, until pricing power over gold and silver moves eastwards, remains on the dollar/euro exchange rate and on the dollar index. The issues that preoccupied us at the end of last year will preoccupy us going into this year but with more intensity.

Gold and silver prices will climb to attack resistance in the next few days as doubts about equities and bonds see them both look attractive to the U.S. investor.

The silver price is going to follow the gold price and both will continue to be priced as monetary metals, ignoring their fundamentals. In 2016 we expect to see the emphasis on the monetary aspect of these metals to begin to reflect in their fundamentals.