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Coins & bullion since 1973
 

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pgrant

jonathan

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Discussion Topics -- March 17, 2014
Russia/Crimea
Gold ETF Inflows
China Slowdown

(March 17, 2014 discussion) The Russian/Crimean conflict continues to underpin the gold price. Gold has risen roughly $75 from the outset of the conflict. Crimea voted Sunday to leave the Ukraine and join Russia - a move that will become official after a confirmation by the Russian parliament. Where Putin goes from here is anyone's best guess, but one has to wonder what will come of other Russian speaking areas of Eastern and Southern Ukraine, as well as regions with similar influence in other former Soviet satellites. Needless to say, the destabilization of this area will remain in focus for the foreseeable future. Meanwhile, the rising gold price has attracted a renewed interest in the gold trade, with gold ETF's showing their first inflows since late 2012. Gold ETF's are required to secure in physical form each and every ounce that is purchased through within the fund. During the massive liquidation of gold last year, substantial physical supplies were noted to move West to East, and end up in strong hands in China. If ETF demand continues to increase, it will be very interesting to see whether or not the funds will be able to acquire the necessary gold. Global demand remains far above supply. Another very large mouth to feed could exacerbate the already burgeoning supply issues. The Chinese economy has begun to slow, and poses a potential headwind to equity values around the world. Moreover, China also allowed its first corporate debt default last week. Until now, Beijing had always bailed out any troubled companies to preserve confidence in its credit markets. We're left to question how many more corporate defaults may come, and what the impact on investor confidence might be. As was the case here in the United States, any fractures in confidence usually lead investors to gold, and such activity will only further support gold demand. The dollar index has moved lower in its range and sits just above the critical support level of 79. A break below this level could cause a massive sell-off in the dollar index, a trend that will be supportive of gold prices. For example, when the dollar index last traded into the low 70's, it paralleled the rise in gold to $1900. 29:11 Minutes, with Jonathan Kosares, Peter Grant and George Cooper.

Figure 1

Gold Price Graph ending march 18

Figure 2

Gold Price 2011 - 2014

Figure 3

Employment Data Feb 2014

Figure 4

Dollar Index

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Coins & bullion since 1973

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