Gold rose $21 last week from $1284 to $1305 having hit a high of $1,306 and a low of $1,275. In sterling terms gold finished the week at £1033 that’s up £23, and in Euros it closed at 1,168 Euros that’s up 22 Euro’s
Silver rose 1 cent from $14.57 to $14.58 having hit a high of $14.64 and a low of $14.31. In sterling terms, it closed at £11.54, that’s up 8 pence and in Euros it closed at 13.05 euros, that’s up 0.05 euros.
The Gold to Silver Ratio rose from 88.1:1 to 89.5:1
The Dow Jones closed on Friday at 24,815 down 354 points on the day and down 770 points on the week, and the NASDAQ closed at 7,453 down 114 points on the day and down 183 points on the week, and the S&P 500 closed at 2752 down 36 points on the day and down 74 points on the week.
Brent Crude fell $4.20 from $68.69 to $64.49 and US Light Crude fell $5.13 from $58.63 to $53.50
The dollar index stands at 97.75 that’s up 0.14 on the week.
Gold prices traded within a $7 range last week initially in a downward momentum until Thursday and then we saw a rise and a steeper rise on Friday placing gold at its highest level since 11th April and above the important psychological level of $1300. Its interesting to note that in our weekly update last week we stated
‘Gold’s movement last week was quite frankly more or less in line with the slight reduction in the dollar index and so our assessment, save, any major political or geopolitical disaster is that gold will be rangebound with a slight downward emphasis.’
Well that was exactly what was happening until President Trump announced that from 10th June, he will be levying a 5% tariff on all Mexican imports ‘until the illegal immigration problem is remedied’.
The President highlighted that this move was necessary in order to tackle a crisis with thousands of undocumented migrants crossing the US southern frontier. We produced a podcast YouTube video on this yesterday entitled:
‘Gold & Silver Prices Rise on Mexico Tariff Threat’
https://www.youtube.com/watch?v=Iao97-WaSpc
Mexico’s Foreign Minister Marcelo Ebrard confirmed on Twitter that he would lead a delegation to Washington, adding: “The treatment of Mexico is unfair and does not make economic sense to anyone.”
He later tweeted that a summit to resolve the dispute would be held in Washington on Wednesday, with US Secretary of State Mike Pompeo heading the US side.
Apart from the normal political suspects, there has been some condemnation of this proposed new tariff from both the US Chamber of Commerce and The Business Roundtable; the latter warning that the move jeopardised the new US-Mexico-Canada trade deal to replace the North American Free Trade Agreement (Nafta).
The tariff threat announcement immediately caused stocks to fall and gold prices to rise and silver prices to recover from their previous ongoing decline
Technical analysts are now stating that they expect gold prices to rise further initially reaching resistance at $1325 and then again at $1350 and the now surpassed $1300 level will act as a floor. Until this matter is resolved, we frankly cannot argue with that expectation and especially with gold actually closing yesterday at the top of the technical candlestick and breaking through the recent downtrend line – which from a chartist point of view is indeed bullish and expecting follow through.
What a difference a week makes especially as gold was in fact heading lower and most analysts had nearly given up the ghost expecting gold to fall to $1250 and then further down towards $1200. Now once again this emphasises the points we have made in the recent past.
Politics does in fact matter in these situations. Its all very well arguing the case of fundamentals and technical and yes, they are crucial for both long term and short term projections. However, there is little more imminent and impactful on prices than political decisions and especially tweet announcements from this incumbent President.
Again, we produced a YouTube video on this very subject on the 6th May entitled:
‘Does Politics Matter?’
https://www.youtube.com/watch?v=qe8xsd-Q2KY&t=3s
Amongst all of these tariff headlines one must also not forget the economic news on interest rates which saw the benchmark 10-year Treasury rate fall to 2.16%, a fresh 20-month low and the 2-year rate dropped to 1.98%, its lowest level since January 2018.
Silver markets were in freefall on Tuesday but regained some composure and then like gold staged a recovery later on Thursday and into Friday though closing some 9 cents short of its week’s high.
Now we have not been backward in coming forward about our short-term negative view on silver. Please note we state short term i.e. for the next 6 – 12 months however with politics i.e. President Trump using tariffs as an instrument or weapon to gain political and economic advantage dominating the marketplace naturally silver is going to move with the same trend as gold though we expect an under performance in comparison which is why the Gold to Silver ratio has now increased to 89.5:1 just shy of that 90:1 level we have predicted will happen very soon.
Once again we have produced a YouTube video on this on the 29th May entitled
‘89 to 1 Gold to Silver Ratio is NOT Madness – It may go up further’
https://www.youtube.com/watch?v=2TBoQVQq1pY&t=3s
The reason we are referring you to these videos or podcasts is that we want you to know that when we produce these – its not just to fill time or earn perhaps $5 AdSense revenue which is the typical income we receive from many of these – but to help guide you to the issues that we believe will affect precious metal prices and also, on occasion to counter some of the ‘pumper hyperbole’ we often see.
We are not in the game of trying to be popular. If we were we would tell you that gold and silver were going to the moon, the dollar is going to collapse imminently and that buying gold and silver from the one or two companies we recommend (because we’d earn a healthy commission if you do) is the way to go.
We don’t do that and therefore very seriously suggest, that with the one or two exceptions where we attempt to be humorous (such as the video on Game of Thrones) and not always being successful admittedly, there is a specific purpose behind the videos or podcasts we produce and that its not just an exercise in self-promotion or revenue earning.
Anyway, back to silver.
From a technical point of view a hammer has been formed which is indeed a bullish sign, but its still too early to tell. $14.85 is the test line and then $15. That said its all about politics for the moment and much depends on the outcome of the tariff threat imposed upon Mexico and of course we still should not forget about those other areas we focussed on last week, including:
- The trade dispute with China;
- increasing tensions with Iran and
- possible missile testing by North Korea
- potential initiation of impeachment proceedings by the democratic House of President Trump who by the way is coming with virtually his entire family to visit our Queen on a State visit on Tuesday.
OK that’s enough about politics for now what economic news can we look forward to next week and please note its quite substantial and Trump’s visit to the UK will probably cause some of this important news to miss the headlines:
- Monday – Markit Manufacturing PMI, the ISM Manufacturing Index and Motor Vehicle sales for May
- Tuesday – Fed’s Policy Conference in Chicago plus factory orders for April
- Wednesday – FED’s policy Conference continues plus Markit Services PMI and ISM Nonmanufacturing Index for May will be announced.
- Thursday – Trade Deficit for April
- Friday – the very important Nonfarm Payroll for May – with 174,000 new jobs forecast plus the unemployment rate and average hourly earnings for May. In addition, we also have Wholesale Inventories and Consumer Credit for April.
So, we have quite a menu of economic reporting all of which should be analysed against what we expect will dominate headlines and that is Mexico, trump’s visit to the UK and the aftermath from Mueller’s public statement.
So next week we can see a continuing in the strengthening of gold and silver prices until the Mexico tariff situation is resolved. We must caution you, however. Once China and Mexico are resolved, and assuming we have seen a significant rise in gold and silver prices, do not be surprised to see their price fall back.
From our assessment, the technical and fundamentals are still pointing in a downward direction. Now we admit this is against the trend of many pundits but had President Trump not mentioned Mexico Thursday night then today we would be producing a very different report today and this holds true if and when these events are resolved.
That said, if you are of the opinion that they won’t be or that the conflict with Iran is likely to escalate and lead to a shooting war then of course we then expect their prices not only to rise but rise considerably. Fortunately, we are not at that stage as yet.
Finally, a brief note for Inner Sanctum Members – we have some interesting interviews lined up for this month so stay tuned – we shall be announcing them shortly.
Meanwhile we hope and wish you an enjoyable weekend and a prosperous week ahead; and although there may be protests about President Trump’s visit to the UK, and we, admittedly, are critical of some of his activities, we still welcome him to our Country as the President of the United States; for the bond between our two countries is far more important than any individual views or prejudices any of us may have.
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