Tuesday, March 8, 2011
Yen Gold making new Lifetime Highs in Price
I think it is important to regularly remind the readers that most of the bearish analysis on gold comes from those whose only concern is its US Dollar price. This betrays a rather shallow understanding of the role of gold in the global economy and particularly its role as a currency.
As a trader I have to focus on the US Dollar price since that is what I am trading but as an investor with a longer term horizon, one must look at how gold is doing in terms of the world's major currencies.
I might add that even as a trader, regularly looks at these charts of gold in other currency terms can at times give one a better glimpse into the dynamics in the gold market. For instance, while there might be some weakness in US Dollar priced gold, it is very risky attempting to short such a market if its Euro-priced or Yen-priced counterpart is making new highs or is very strong on the price charts.
The reasons for the strength in Yen gold are listed on the chart below. It is the same reason that gold is in such fantastic demand across Asia - that entire region is dealing with inflation problems that are becoming very difficult for the monetary authorities to get under control. Rising energy costs are being felt even in Japan and are being compounded by the cost of food as elsewhere.
As a trader I have to focus on the US Dollar price since that is what I am trading but as an investor with a longer term horizon, one must look at how gold is doing in terms of the world's major currencies.
I might add that even as a trader, regularly looks at these charts of gold in other currency terms can at times give one a better glimpse into the dynamics in the gold market. For instance, while there might be some weakness in US Dollar priced gold, it is very risky attempting to short such a market if its Euro-priced or Yen-priced counterpart is making new highs or is very strong on the price charts.
The reasons for the strength in Yen gold are listed on the chart below. It is the same reason that gold is in such fantastic demand across Asia - that entire region is dealing with inflation problems that are becoming very difficult for the monetary authorities to get under control. Rising energy costs are being felt even in Japan and are being compounded by the cost of food as elsewhere.
Silver Deliveries remain rather mediocre - Updated Silver Chart
Data released this morning shows that only 20 deliveries were posted against the March silver contract for tomorrow. That brings the total to a mere 328 since the delivery process began.
I am not seeing much activity in the Against Actuals either but we still have nearly 1,600 contracts left open in the March so that is a possiblity. There were a bit over 1300 done in the May but that is not that big of a deal at this point although I am watching that closely.
There has been some chatter about Morgan supposedly offering cash payments in lieu of deliveries but I am not picking anything up in the EFP category that might confirm that as of yet.
The March remains at a very slight discount to the May and the July but the difference is so close as to be negligible.
I am not seeing much activity in the Against Actuals either but we still have nearly 1,600 contracts left open in the March so that is a possiblity. There were a bit over 1300 done in the May but that is not that big of a deal at this point although I am watching that closely.
There has been some chatter about Morgan supposedly offering cash payments in lieu of deliveries but I am not picking anything up in the EFP category that might confirm that as of yet.
The March remains at a very slight discount to the May and the July but the difference is so close as to be negligible.
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