We hope you’ve been enjoying the slightly sunnier, warmer weather. It looks as if we may well not be out of the woods yet though, with snow forecast for a third time this winter in some areas of the UK.
Meanwhile, it’s time for our brief Monthly Update on the news stories that are most likely to affect the price of Gold and Silver. It’s often hard to find the link between the news and the moves in the gold price. Sometimes, this is due to a delay in the precious metals market’s reaction. Sometimes, as Eric Sprott and company believe, this is due to market manipulation within precious metals – more on that later.
But first, to two items within the news which deserve our attention. And then, after a brief interlude looking at the question of said manipulation, we will briefly touch on three more pointers within this month’s round-up.
A Recent Rise in the Strength of the Dollar
We recently touched on the concerns of a trade war between the East and the West. As these fears have temporarily subsided, the strength of the dollar has edged higher. This is one of the major factors influencing this week’s fall in the Gold price. As Forex Empire discusses:
“Gold prices have been plunging lower over the last 24 hours as the dollar began to gain back some of its strength over the last couple of days. The gold prices had risen to the top of the large range last week on the back of fears and uncertainties over the trade war breaking out.
But over the last few days, there has not been many developments or follow up regarding this action and that is the reason why we are seeing the risk sentiment going down around the markets, as a sense of calm begins to come over the markets. The stock markets have been able to recover since the beginning of the week and as the markets begin to recover, we are seeing the investors and traders moving their funds back into the stocks.
This has led to a drain of funds from the gold markets to the stock markets and this has placed a lot of pressure on the gold prices. It appears that the weakening might continue for a bit but, for the long-term traders and the trend traders, it would be a disappointment as this has meant that the gold prices are back into range and this would mean more of consolidation and ranging in the short term.”
The stock market is such a strange creation, in many senses. Many of our clients own Physical Gold and Silver precisely because it’s a real asset, something we can hold and touch, and that is of finite supply. So, to many of you, the news surrounding the stock market is often just “noise.”
But, in reality, that “noise” does affect the set price of Gold and the precious metals on any given day, precisely because these prices are set in regards to trading pieces of paper saying someone “owns” the physical. This is not technically true. Only 1 ounce of physical gold actually exists compared to approximately 545 ounces of Gold traded on the stock market floor every day!
Falling Prices in the London Property Market
Only last week – quite presciently, as it often turns out – we produced a piece on the correlating cycle between Property and Gold. This cycle is certainly worthy of some study to every investor in precious metals, as it gives us obvious pointers as to the profitability of Property vs. Gold, dependent on the position in the cycle in which we find ourselves. If you missed it, enjoy a read here.
Exactly one week later, This Is Money report that “House prices are falling in 42 per cent of London’s postcodes and are tipped to fall across the capital by summer, according to a new report today.” It is normative for London property prices to foreshadow national property price moves. So, this is yet again another signal that the cycles are turning.
We cannot give financial advice and are not saying that property prices will go down imminently. But we are saying, add a watch to property prices to your research list and read about the correlation between property and gold.
Because “London house prices have seen the smallest rise in nearly seven years and are set to start declining this summer as already two fifths of the capital’s postcodes are recording price falls, new data show. Annual house price inflation in London has tumbled from 4.3 per cent a year ago, with the 1 per cent rise representing the smallest increase since August 2011.” (This is Money)
Now, for the second half of this month’s update, I would like to look at a background hum to the noise of the news. This hum has existed for decades within the Gold and precious metals market. Many believe it is the reason why we cannot predict the price moves in Gold based upon events in the news, with more accuracy.
Manipulation in Precious Metals Markets
This has been a point of thorough discussion for years, over many forums and by many commentators. But, only this morning Talk Markets released this statement piece, which is quite bold in its assessment of the current level of price manipulation:
“Central bank gold price suppression is a well-documented fact. Central banks have a long and colorful history of manipulating the gold price. This manipulation has taken many shapes and forms over the years. It also shouldn’t be surprising that central banks intervene in the gold market given that they also intervene in all other financial markets. It would be naive to think that the gold market should be any different.
In fact, gold is a special case. Gold to central bankers is like the sun to vampires.” (Let’s just take a moment to savour the joyous wit of that metaphor. Right, on we go…)
“They are terrified of it, yet in some ways, they are in awe of it. Terrified since gold is an inflation barometer and an indicator of the relative strength of fiat currencies. The gold price influences interest rates and bond prices. But central bankers (who know their job) are also in awe of gold since they respect and understand gold’s value and power within the international monetary system and the importance of gold as a reserve asset.
So central banks are keenly aware of gold, they hold large quantities of it in their vaults as a store of value and as financial insurance, but they are also permanently on guard against allowing a fully free market for gold in which they would not have at least some form of influence over price direction and market sentiment.” And yet another article is published today, also on the topic of manipulation by a world-renowned expert:
“Will physical gold and silver prices ever break free of manipulation and price suppression? Renowned gold expert Andrew Maguire with Tom Coughlin, who is CEO of Kinesis that will be rolling out a gold backed currency in the fall, both say yes.” Maguire believes in both the factual existence of manipulation to such an extent that he is introducing the following gold-backed currency to try to get around the problem:
Coughlin explains, “It’s actually classified as a monetary system, and it’s called Kinesis. The reason we call it Kinesis is that it actually stimulates the flow of money. We see this as reintroducing the gold and silver standard through this monetary system.” Maguire says there will be actual precious metal backing it up.
Maguire says there will be actual precious metal backing it up. Maguire says, “The backup will be gram for gram. This is the interesting part about it. We all know that the paper markets (for gold) have leverage of 500 to 1. We actually think it is much closer to 1,000 to 1 when you account for all the derivatives. . . . Here’s the thing about Kinesis. We’re talking about a market that is at the margin. It’s so tight this physical/paper market is already at the margin. We are witnessing right now real competing physical demand, and that is forcing discipline on the paper market, and it raises the point where the lines cross. . . . What’s it going to do to the paper market? It’s going to raise the offer to sell immediately deliverable physical gold. . . . Kinesis is going to be a game changer.” (US Watch Dog)
So, this view – that manipulation is so great that a gold and silver backed currency is even needed – leaves all our well researched commentary to our readers at a disadvantage. We can observe the fundamentals within the markets and geo-political arena and report on them as much as we can. Bleyer have always valued Financial Education as a central premise to our company. But, at the same time, our very best efforts will not be able to predict the unpredictable.
Manipulation or Not
Now, it is important to portray a balanced view. And there are those who believe “manipulation” in the Gold market doesn’t, in fact, exist. I am surprised to find this printed in the Market Oracle however, as our position is to provide a balanced view for our readers to draw their own conclusions, so here is the alternative view:
“GATA has been trying to convince all those who are willing to listen that it is not its fault that the metals market dropped from 2011 to 2015 (where silver lost 75% of its value). Rather than admitting that it was not able to foresee a standard market correction — which I warned about before it happened — it has been focusing on that big bad scapegoat named “manipulation.” And, it takes bits and pieces of what people say in order to “prove” its point.”
Now that I have touched on the view that manipulation may skew the results of our news research, so to speak, let’s continue with one final point, which has come into view this month.
Frank Holmes – Chief Executive Officer of US Global Investors – published a piece in Market Watch, again only today (28/03/18), in which he suggests the Gold price could rise to $1,500 this year:
“Despite pressure from the rally in global stocks and massive crypto-currency speculation, gold futures have edged up by nearly 3% year to date, outpacing a 2.4% gain in the S&P 500, according to Holmes, a well-known gold bull.”
“Gold prices may even eventually climb to new highs at $1,900 an ounce,” Holmes said. “If we see inflation ramp up, then … we could see gold move to new heights.”
To put into context, “Gold futures reached a record settlement at $1,891.90 on Aug. 22, 2011” which was before the long-standing current price correction set in.
So, to sum up, this month there are three signals as to where the price of Gold may move:
- The strength of the dollar – as it rises this may affect the gold price downwards
- The London property market – as this falls this may affect the gold price upwards
- Inflation – as this rises this may affect the gold price upwards
Set against these is the winds of manipulation – do they exist? How do we read them if we can’t see them? We would encourage our readers to research.
To discuss any of these points further or to continue to increase your own holdings and investment in physical Gold and precious metals as a store of wealth, call a member of the team on 01769 618618 or choose and order your products online at www.bleyerbullion.co.uk
We hope you stay safe in any forecast inclement weather and perhaps even enjoy the third round of sledging and snowball fights!