Inauguration Day: Gold still consolidating around $1,200

Gold Today –New York closed at $1,201.50 on the 19th January after closing at $1,205.60 on the 18th January. London opened at $1,202.45 today.

 Overall the dollar is weaker against global currencies today. Before London’s opening:

         The $: € was weaker at $1.0679: €1 from $1.0652: €1 yesterday.

         The Dollar index was weaker at 100.97 from 101.20 yesterday. 

         The Yen was stronger at 114.73: $1 from yesterday’s 114.80 against the dollar. 

         The Yuan was almost unchanged at 6.8765: $1, from 6.8767: $1, yesterday. 

         The Pound Sterling was stronger at $1.2355: £1 from yesterday’s $1.2302: £1.

 Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    1    20

     2017    1    19

      2017    1    18

SHAU

SHAU

SHAU

/

268.36

271.53

/

268.26

271.12

$ equivalent 1oz @  $1: 6.8765

      $1: 6.8767

$1: 6.8425

  /

$1,213.80

$1,234.28

/

$1,213.35

$1,232.41

Please note that the Shanghai Fixes are for 1 gm of gold. From the Middle Eat eastward metric measurements are used against 0.9999 quality gold. [Please note that the 0.5% difference in price can be accounted for by the higher quality of Shanghai’s gold on which their gold price is based over London’s ‘good delivery’ standard of 0.995.]

Shanghai consolidated yesterday pulling back 3 Yuan or just over 1% with the Yuan a tiny bit stronger against the dollar. The fall does not indicate any more than a healthy correction.

Does this express a loss of pricing power? New York is at a $7 discount to Shanghai and London a narrowing of over $14. It would appear so [but only on a daily basis]. But Shanghai could drive prices tomorrow. We have to allow for corrections where demand on a daily basis [because prices have run too high?] pulls back and supply dominates for the short time it happens, before demand comes back at lower levels.

Some may feel that because London is the main physical market in the developed world it supplies China exclusively. Yes, the world’s main bullion banks are based in London, but they operate in both centers. Their hold over supply is far less than most believe. For instance the Rand Refinery in Johannesburg South Africa will sell to any buyer including the Chinese directly. It does not have exclusive agreements with the world’s main banks, as it had in 1974 with the three main Swiss Banks [the ‘pool’]. Shanghai buys from Switzerland and directly from producers/refineries. Hence we do not accept that London is the sole supplier of Shanghai. Add to that the profitability of the arbitrage trade which will smooth out price differentials. But because Shanghai is by far the largest physical gold market in the world, it does have pricing power normally.  We will see that in the next week/month.

LBMA price setting:  The LBMA gold price setting was at $1,199.10 this morning against yesterday’s $1,203.35. 

The gold price in the euro was set lower at €1,127.93 after yesterday’s €1,129.06 as the dollar weakened.

Ahead of the opening of New York the gold price was trading at $1,200.00 and in the euro at €1,128.77.  At the same time, the silver price was trading at $16.90. 

Silver Today –Silver closed at $17.00 at New York’s close yesterday from $17.08 on the 18th January. 

Price Drivers

On Inauguration Day we see President Trump take the reins. In addition, with the Republicans in the majority in both Congress and the Senate, government, at last is in a position to do something, without the opposition blocking it. The expectations are high, likely too high.

The U.S. economy is healthy so we are open to what the Fed also says as to interest rates. We don’t think they will change rates as they will want to see how the new President will move forward on respecting the economy. Only then will they act, or not.

The U.S. based gold ETFs continue to be relatively static after some buying recently. Exchange rates continue to have a major impact on the gold prices with China playing a strange game. All know that the Yuan should fall and the PBoC is targeting certain types of capital outflow, which do not benefit either the Yuan or the Chinese economy [such as wealth exiting China] but are still intervening in the Yuan exchange rate.

With such blocks on capital outflows, Chinese investors are favoring gold, which is a protection against a falling exchange rate of the Yuan. With gold such a strategic asset the government has encouraged Chinese investors to buy gold hence we do not believe that they have placed restraints on imports of gold.

Gold ETFs – Yesterday, in New York, there were no purchases or sales into or from the SPDR gold ETF (GLD) or the Gold Trustb  (IAU), leaving their respective holdings at 807.96 tonnes and 198.75 tonnes. 

Since January 4th 2016, 205.83 tonnes of gold has been added to the SPDR gold ETF and to the Gold Trust. 

 Julian D.W. Phillips: GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

UPDATE: Same old, same old. Yellen speaks, gold falls

Here’s a lightly edited version of my latest article posted on the Sharps Pxley website yesterday – trying to make sense of gold’s latest price movements as President Trump’s inauguration approaches.  Yet again today gold is testing the $1,200 level on the downside and this time around the level may not be held, particularly if the Donald’s inauguration address seems to be conciliatry, as it probably will be – but with Trump who knows?

Gold investors are obviously holding back until they see which way the wind blows.  The world’s biggest gold ETF, GLD, has seen no purchases or sales since last Friday when 2.96 tonnes were added.  GLD sales or purchases do seem to provide something of a guide to the gold price direction – in the US dollar at least, which looks to be strengthening a little today – indeed today’s gold price weakness may well be down to a small recovery in the dollar index.

The EDITED VERSION OF THE Sharps Pixley article follows:

Gold has had a decent run, after a sharp fall immediately following last month’s US Fed interest rate rise.  If one looks back to last year, the gold price was volatile, particularly before and after the various Fed Open Market Committee (FOMC) meetings and it looks that this year the same may happen all over again, but this time around gold price movement up or down may be tempered by the perceptions of how the USA’s 45th President’s proposed policies may affect the economy.  While the Fed may be set on at least three interest rate rises this year – Yellen’s San Francisco statement yesterday did nothing to suggest this wouldn’t happen – we still think they may play wait-and-see before pulling the interest rate trigger, although others, like the well-respected, but nowadays slightly alarmist commentator, Jim Rickards, think the Fed will move quickly and implement another 25 basis point increase as early as March.

This year’s FOMC meetings, at which interest rate decisions are usually made, are due to be held right at the end of this month (Jan 31-Feb 1), which is almost certainly too close to the President Trump inauguration (tomorrow) for any such decision to be made.  The following meeting will be on March 14-15 – Rickards’ suggested date for the next rate rise – then May 2-3 and June 13-14 bring up the balance of FOMC meetings in H1 2017. We think the Fed may err on the side of caution and wait for one of these latter two meetings to raise rates for the first time in 2017 – if at all – in order to see which way the economic wind is blowing after the first few months of office of perhaps the most divisive U.S. President ever.  However an early rate rise could be seen as a Fed attempt to regain credibility given its failure to match its own economic predictions in previous years.

For the record, the H2 FOMC meetings will be on July 25-26, September 19-20, October 31-November 1 and December 12-13.  Expect gold price volatility around all these dates, as we saw in 2016.  If the Fed does raise rates early and the U.S. economy looks stable, unemployment doesn’t rise and equity markets don’t collapse then there could be a further two, or even three, rises in H2, but the uncertainty around the Trump Presidency makes this far from a sure thing.

Yellen’s statement yesterday did reiterate that in her, and presumably her colleagues’, viewpoint the U.S. economy remains on course to be able to support three small interest rate hikes this year, and more next, with a potential target of ‘normality’ of around 3% by the end of 2019.  But the Fed has been notoriously poor in its predictions for the strength or otherwise of the U.S. economy over the past five years or so.  Has its forecasting suddenly improved.  The Trump Presidency could well throw the Fed’s projections into disarray yetr again – but this could go either way if the new President’s policies are perceived to be generally stimulative for the U.S. economy.

Yet Rickards, despite his prediction that the Fed will raise interest rates at the March FOMC meeting disagrees: “They (The Fed) will raise (rates) in March and then something will hit the wall, either the economy or the stock market or both. Then the Fed will backpedal from there, starting with a forward guidance then perhaps a rate cut later in the year,” he says on his blog, and recommends holding gold and U.S. 10-year Treasurys.

If Rickards is correct in his predictions, the gold price could fly in the final three quarters of the year as the Fed misses its interest raising opportunities again.  But others do see the U.S. economy, inflation and unemployment levels ticking all the boxes for the Fed’s interest rate raising plans going forward.

But so much will depend on President Trump and whether Congress will allow him to proceed with his plans to cut taxes, spend heavily on infrastructure to boost the economy and implement other fiscal stimuli and cut legislative blockages given the country’s huge debt position.  The Trump proposals, if implemented, can only increase debt!  If the Trump boost to the economy is thwarted – there may be a Republican majority in both houses, but there are a number of anti-Trump GOP members in Congress and coupled with probably blanket opposition from the Democrats still sore over the Trump Presidential Election victory – the Donald’s legislative path may thus not be an easy one.

The last day of April will see the Trump Administration’s first 100 days in office – a time when the media tends to make its first judgments of likely success or otherwise of the new President’s proposed programmes – and we believe the Fed should not take any interest rate raising decisions before then at least, although what we believe is a sensible course will hardly influence the FOMC in its deliberations!

What will the first 100 days see?  We think some of the proposed policies will have to be rolled back altogether and a number of compromises will have to be made to satisfy Congress, while the Senate may block one or more of the Presidents’ proposed cabinet members from taking office which coluld make for an adverse perception of President Trump’s promises and his ability to deliver on them..

Gold is testing the $1,200 level on the downside today, but the enormous opposition to Trump as President, which will likely be highlighted by huge demonstrations in the nation’s capital, may sober the equity markets and boost gold again temporarily – but thereafter volatile markets are likely until a much clearer idea of where Trump policies are taking the nation become apparent.

Perhaps precious metals investors should take heart though from my colleague Ross Norman’s price predictions for the current year – See:  Sharps Pixley Forecasts Gold To Average $1310 With A High Of $1390 In 2017

Has gold found a $1200 base with a turbulent and divisive future?

Gold Today –New York closed at $1,205.60 on the 18th January after closing at $1,215.60 on the 17th January. London opened at $1,203.30 today.

 Overall the dollar is stronger against global currencies today. Before London’s opening:

         The $: € was stronger at $1.0652: €1 from $1.0687: €1 yesterday.

         The Dollar index was stronger at 101.20 from 100.69 yesterday. 

         The Yen was weaker at 114.80: $1 from yesterday’s 113.45 against the dollar. 

         The Yuan was weaker at 6.8767: $1, from 6.8425: $1, yesterday. 

         The Pound Sterling was stronger at $1.2302: £1 from yesterday’s $1.2298: £1.

Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    1    19

     2017    1    18

      2017    1    17

SHAU

SHAU

SHAU

/

271.53

270.74

/

271.12

272.18

$ equivalent 1oz @  $1: 6.8767

      $1: 6.8425

$1: 6.8860

  /

$1,234.28

$1,222.91

/

$1,232.41

$1,229.41

Please note that the Shanghai Fixes are for 1 gm of gold. From the Middle Eat eastward metric measurements are used against 0.9999 quality gold. [Please note that the 0.5% difference in price can be accounted for by the higher quality of Shanghai’s gold on which their gold price is based over London’s ‘good delivery’ standard of 0.995.]

 Shanghai continues to trade over 271 Yuan holding its ground. The reason for the fall in dollar prices was a strengthening of the U.S. dollar.

In the last month the Yuan gold price has gone from 259 to 272 with the gold price in Yuan.

We stated yesterday that, “if pricing power does reside in Shanghai as it has done in the last fortnight the Yuan price of gold will either hold or rise in the Yuan.” It has held these levels.

New York closed $21.89 lower than Shanghai on yesterday. London opened at around $24.19 lower than Shanghai was trading today. This is a wide differential so the next day will see which center follows which.

LBMA price setting:  The LBMA gold price setting was at $1,203.35 this morning against yesterday’s $1,212.50. 

The gold price in the euro was set lower at €1,129.06 after yesterday’s €1,135.25 as the dollar weakened.

Ahead of the opening of New York the gold price was trading at $1,203.00 and in the euro at €1,128.94.  At the same time, the silver price was trading at $16.96. 

Silver Today –Silver closed at $17.08 at New York’s close yesterday from $17.17 on the 17th January. 

Price Drivers

Right now with no U.S. gold ETF buying the exchange rate of the dollar is moving the dollar gold price. In the euro and the Yuan, it is much more stable. It has overcome the psychological barrier of $1,200 and is building a firm foundation for moves higher in line with the steadily rising Yuan price.

India – We haven’t seen any sign of Indian demand affecting the gold price, but it is coming as fast as the Indian printing presses can print the new high denomination notes.

President-elect Trump continues to be a ‘master of the media’, with every seemingly outrageously attacking comment he makes, making headlines. Was it Mae West who said, “There’s no such thing as bad publicity”? It seems that Trump agrees. He comes in tomorrow [with an argument in the press of how many will attend his inauguration – really!] as the President of the U.S.A. for four years at least!

In Davos at the World Economic Forum the concern is about the rise of ‘Popularism’ and the threat to the establishment. Also job destroying, artificial intelligence is a concern. These two do have the potential to make global electorates most unhappy, particularly in the west. These two will be a major factor in social unrest, not of themselves but underpinning other issues that cause people to force change in the future. The sum total of the reports out of that haven is that the future will be turbulent and divisive.  

In China, these undercurrents will be felt less as most of its people are government supportive as they have only recently escaped poverty and are content. But even there, the popularity of gold continues to grow as the alternatives have been disappointing. With the government taking ever greater measures [while avoiding direct capital controls] to stem the outflow of funds from the country, many will turn to gold to avoid the falling Yuan. At the end of the day the government will give into downward pressures on the Yuan. Never in history have government measures succeeded in halting a devaluation of its currency when overwhelming, market forces push it down.

The question for Trump is, “Does the Treasury have enough resources to push the dollar down?” as he wants?

U.S. physical selling from the U.S.-based gold ETFs continues to be absent from the market. But there was a small purchase into the Gold Trust yesterday.

Gold ETFs – Yesterday, in New York, there no purchases or sales into or from the SPDR gold ETF (GLD) but there was a purchase into the Gold Trust (IAU) of 0.45 of a tonne of gold, leaving their respective holdings at 807.96 tonnes and 198.75 tonnes. 

Since January 4th 2016, 205.83 tonnes of gold has been added to the SPDR gold ETF and to the Gold Trust. 

Julian D.W. Phillips: GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

Lower dollar keeping gold and silver stable

Gold Today –New York closed at $1,215.60 on the 17th January after closing at $1,196.20 on the 16th January. London opened at $1,213.00 today.

 Overall the dollar is weaker against global currencies today. Before London’s opening:

         The $: € was weaker at $1.0687: €1 from $1.0650: €1 yesterday.

         The Dollar index was weaker at 100.69 from 101.09 yesterday. 

         The Yen was almost unchanged at 113.45: $1 from yesterday’s 113.44 against the dollar. 

         The Yuan was stronger at 6.8425: $1, from 6.8860: $1, yesterday. 

         The Pound Sterling was stronger at $1.2298:£1 from yesterday’s $1.2115: £1.

 Yuan Gold Fix

Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    1    18

     2017    1    17

      2017    1    16

SHAU

SHAU

SHAU

/

270.74

269.21

/

272.18

270.15

$ equivalent 1oz @  $1: 6.8425

      $1: 6.8860

$1: 6.9082

  /

$1,222.91

$1,212.10

/

$1,229.41

$1,216.32

Please note that the Shanghai Fixes are for 1 gm of gold. From the Middle Eat eastward metric measurements are used against 0.9999 quality gold. [Please note that the 0.5% difference in price can be accounted for by the higher quality of Shanghai’s gold on which their gold price is based over London’s ‘good delivery’ standard of 0.995.]

 Shanghai gold held the same levels as yesterday, today, of around 272 Yuan. Because of the PBoC’s selling dollars to strengthen the Yuan it does seem that the gold price in the dollar jumped over $13 on yesterday in Shanghai.

If one takes today’s Yuan exchange rate and uses that to translate 272 Yuan into a dollar price you arrive at $1,236. In the last week the Yuan exchange rate has gone from 6.94 to 6.84 with the gold price in Yuan rising 8 Yuan at the same time.

If pricing power does reside in Shanghai as it has done in the last fortnight the Yuan price of gold will either hold or rise more in the Yuan.

New York closed $9 lower than Shanghai on yesterday. London opened at around $11.00 lower than Shanghai was trading today.

LBMA price setting:  The LBMA gold price setting was at $1,212.50 this morning against yesterday’s $1,217.50. 

The gold price in the euro was set lower at €1,135.25 after yesterday’s €1,138.49 as the dollar weakened.

Ahead of the opening of New York the gold price was trading at $1,213.20 and in the euro at €1,135.53.  At the same time, the silver price was trading at $17.12. 

Silver Today –Silver closed at $17.17 at New York’s close yesterday from $16.76 on the 13th January. 

Price Drivers

President-elect Trump has pointed out that the dollar is too strong. And we feel he is right. Bearing in mind that the U.S. has run a Trade deficit since before the beginning of this century, it is clearly the use of the dollar in international trade that has caused its strength, particularly as the oil currency.

We have pointed out that such use will change, particularly in the oil market in the future. Add to that the growing presence of the Yuan in international trade and most likely, its increasing place in national reserves.  

The problem is that other currencies such as the euro and the Yen will try to weaken their currencies so the dollar does not fall against them. If the U.S does follow a road to weaken the dollar the ‘currency’ war will gain considerable momentum and the multi-currency monetary system will be on us. This would be very positive for gold.

U.S. physical buying or selling into or from the U.S.-based gold ETFs continues to be absent from the market. As we said yesterday, with a weaker dollar, New York did see a ‘shunt’ effect and go higher, simply because of the price differential. We expect this to continue!

Gold ETFs – Yesterday, in New York, there no purchases or sales into or from the SPDR gold ETF (GLD) or the Gold Trust (IAU), leaving their respective holdings at 807.96 tonnes and 198.30 tonnes. 

Julian D.W. Phillips GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

Gold and silver moving up on weaker dollar

Gold Today –New York closed at $1,196.20 on the 16th January after closing at $1,198.30 on the 13th January. London opened at $1,213.20 today.

Overall the dollar is weaker against global currencies today. Before London’s opening:

         The $: € was weaker at $1.0650: €1 from $1.0593: €1 yesterday.

         The Dollar index was weaker at 101.09 from 101.70 yesterday. 

         The Yen was stronger at 113.44: $1 from yesterday’s 114.11 against the dollar. 

         The Yuan was stronger at 6.8860: $1, from 6.9082: $1, yesterday. 

         The Pound Sterling was stronger at $1.2115: £1 from yesterday’s $1.2056: £1.

 Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    1    17

     2017    1    16

      2017    1    13

SHAU

SHAU

SHAU

/

269.21

268.51

/

270.15

268.96

$ equivalent 1oz @  $1: 6.8860

      $1: 6.9082

$1: 6.8873

  /

$1,212.10

$1,212.61

/

$1,216.32

$1,214.64

Please note that the Shanghai Fixes are for 1 gm of gold. From the Middle Eat eastward metric measurements are used against 0.9999 quality gold. [Please note that the 0.5% difference in price can be accounted for by the higher quality of Shanghai’s gold on which their gold price is based over London’s ‘good delivery’ standard of 0.995.]

 Shanghai gold prices moved higher, with strength, through the $1,210 resistance. It traded today over Yuan 270 reaching 272 at one point. This equates, on today’s exchange rate, to $1,219.57 and $1,228.60.

Chinese investors know the Yuan will continue to fall and are protecting themselves against this. While the People’s Bank of China has been selling dollars to lift the Yuan over the last week, we doubt they will keep doing this after President Trump as of the 20th January takes office. China is preparing for a confrontation with him. We therefore see the Yuan continuing to weaken in 2017 and Chinese demand to remain robust, despite Xi’s plea not to go to a trade war and keep markets free at Davos.

New York closed $15.12 lower than Shanghai on yesterday. London opened at around $7.00 lower than Shanghai was trading today.

LBMA price setting:  The LBMA gold price setting was at $1,217.50 this morning against yesterday’s $1,202.75. 

The gold price in the euro was set higher at €1,138.49 after yesterday’s €1,135.96 as the dollar weakened.

Ahead of the opening of New York the gold price was trading at $1,214.20 and in the euro at €1,133.97.  At the same time, the silver price was trading at $17.00. 

Silver Today –Silver closed at $16.76 at New York’s close yesterday from $16.80 on the 13th January. 

Price Drivers

U.S. physical buying or selling into or from the U.S.-based gold ETFs was absent from the market yesterday due to the Martin Luther King Day holiday. With a weaker dollar, this should have led to higher gold prices, but somehow New York prices did not go higher despite stronger prices in London and Shanghai. New York’s influence over the gold price in such conditions is weak, so we expect New York to see a ‘shunt’ effect and go higher today, simply because of the price differential.

In London the gold prices moved with the euro, rising in dollar terms but steady in the euro. Before New York opened the dollar continued to weaken, but dealers, aware of New York’s close yesterday pulled prices back. This will accelerate the moves higher.

Influences to make it rise further in the developed world will be significant as Prime Minister May made clear her policies on Brexit. Prime Minister Theresa May pledged to pull Britain out of the European Union’s single market while staying inside parts of its customs union, saying the U.K. parliament will get a vote on the final Brexit deal.

Sterling was discounting some of the bad news, but has the capacity to fall further and further in the days to come. This means that gold is rising strongly in st

erling terms and will continue to do so. However, at the time of writing, sterling was strengthening.

The fundamentals for gold are improving strongly as Indians return to the gold market, alongside Chinese demand. The tensions of a Trump Presidency are mounting promising confrontations with China and with the E.U. as his tweets indicate. The relative calm on the international front seems to have already been disrupted by Trump. We wait to see just how many of these comments can be brought to action?

Gold ETFs – As noted above, yesterday, in New York, there no purchases or sales into or from the SPDR gold ETF or the Gold, leaving their respective holdings at 807.96 tonnes and 198.30 tonnes. 

Since January 4th 2016, 205.38 tonnes of gold has been added to the SPDR gold ETF and to the Gold Trust. 

Julian D.W. Phillips : GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance  

Purchases into GLD suggest change in attitudes towards gold in USA

Gold Today –New York closed at $1,198.30 on the 13th January after closing at $1,195.40 on the 12th January. London opened at $1,202.25 today.

 Overall the dollar is stronger against global currencies today. Before London’s opening:

         The $: € was stronger at $1.0593: €1 from $1.0633: €1 Friday.

         The Dollar index was slightly stronger at 101.70 from 101.33 Friday. 

         The Yen was stronger at 114.11: $1 from Friday’s 114.70 against the dollar. 

         The Yuan was weaker at 6.9082: $1, from 6.8873: $1, Friday. 

         The Pound Sterling was weaker at $1.2056: £1 from Friday’s $1.2168: £1.

Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    1    16

     2017    1    13

      2017    1    12

SHAU

SHAU

SHAU

/

268.51

269.17

/

268.96

269.25

$ equivalent 1oz @  $1: 6.9082

      $1: 6.8873

$1: 6.9225

  /

$1,212.61

$1,215.59

/

$1,214.64

$1,215.95

Please note that the Shanghai Fixes are for 1 gm of gold. From the Middle Eat eastward metric measurements are used against 0.9999 quality gold. [Please note that the 0.5% difference in price can be accounted for by the higher quality of Shanghai’s gold on which their gold price is based over London’s ‘good delivery’ standard of 0.995.]

 Shanghai gold prices, having corrected on Friday, are, again, moving higher touching 270.1 Yuan or $1,211.1 in today’s trading [using the same quality of gold]. It is always tempting to make prices simple to understand even if it means attributing any moves in the gold price to any handy piece of news locally. But that would be misleading. Chinese prices are rising because of Chinese market conditions, not because of Trump’s latest tweet.

New York closed $11.34 lower than Shanghai on Friday. London opened at $3.85 lower than Shanghai was trading today.

LBMA price setting:  The LBMA gold price setting was at $1,202.75 this morning against Friday’s $1,196.35. 

The gold price in the euro was set higher at €1,135.96 after yesterday’s €1,123.54 as the dollar weakened.

Ahead of the opening of New York the gold price was trading at $1,203.30 and in the euro at €1,135.98.  At the same time, the silver price was trading at $16.84. 

Silver Today –Silver closed at $16.80 at New York’s close Friday from $16.78 on the 12th January. 

 Price Drivers

While Shanghai continues to drive gold prices higher, we can now see a change in attitude towards gold in the U.S. as in both the Gold Trust and the SPDR gold ETF we are now, once again, seeing good purchases of gold volumes [not huge].

U.S. buying will not drive U.S. prices, as the physical gold bought into these two ETFs happens in London, not New York. But as the price upward pressure from this buying joins with Shanghai’ demand, we expect a shortage of gold in London to be exacerbated and take prices higher.

It is becoming clearer to all that President Trump will bring his deal-making business tactics to foreign policy, much to the objection of current foreign policy makers. This is well illustrated by his attitude to China and Taiwan. He has made it clear he wants something in return for keeping that policy. We suspect that China is now confident enough in its own global power to stand up to his attitude. But Trump, as we have seen in his campaign and books, will not back off.  This has to lead to global tensions ballooning. This will be positive for gold.

We expect the ‘ripples’ from the ensuing pressures to be felt first in global trade, but more so in the currency world spreading to changes in the monetary system. Again, this is positive for gold and silver as, perhaps, U.S. gold ETF buying is indicating.

As we said on Friday, “The psychological $1,200 will cause the gold price to pause as it is doing now. But we feel $1,200 will not be a significant barrier.”

U.K. – The Pound Sterling fell below $1.20, before recovering a little ground,  ahead of Prime Minister May’s speech on Brexit due tomorrow. We understand this as it has given Britain a tremendous trade boost, as the Pound has fallen from around $1.50 since Britain voted to leave the E.U. And Brexit has not yet been triggered! In other words, the Pound continues to fall against gold!

The E.U.’s Draghi would only wish to see the same happen to the euro.

Gold ETFs – Friday, in New York, there were purchases of 2.964 tonnes into the SPDR gold ETF but no change in the Gold Trust holdings, leaving their respective holdings at 807.96 tonnes and 198.30 tonnes. 

These purchases into the SPDR gold ETF are the first since the Fed raised interest rates and Trump was elected!

We did not think this would happen until President Trump was well settled in the White House. But as a sign that market attitudes are changing in the U.S. towards gold, the buying has begun in earnest. The first purchases happened last week into the Gold Trust.

Since January 4th 2016, 205.38 tonnes of gold has been added to the SPDR gold ETF and to the Gold Trust. 

Julian D.W. Phillips GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

Indian gold demand rebuilding; gold price consolidating

Gold Today –New York closed at $1,195.40 on the 12th January after closing at $1,190.90 on the 11th January. London opened at $1,195.45 today.

 Overall the dollar is slightly weaker against global currencies today. Before London’s opening:

         The $: € was slightly weaker at $1.0633: €1 from $1.0631: €1 yesterday.

         The Dollar index was slightly stronger at 101.33 from 101.25 yesterday. 

         The Yen was slightly weaker at 114.70: $1 from yesterday’s 114.52 against the dollar. 

         The Yuan was stronger at 6.8873: $1, from 6.9115: $1, yesterday. 

         The Pound Sterling was weaker at $1.2168: £1 from yesterday’s $1.2249: £1.

 Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    1    13

     2016    1    12

      2016  12    11

SHAU

SHAU

SHAU

/

269.17

268.72

/

269.25

269.00

$ equivalent 1oz @  $1: 6.8873

      $1: 6.9225

$1: 6.9244

  /

$1,215.59

$1,209.31

/

$1,215.95

$1,210.57

Please note that the Shanghai Fixes are for 1 gm of gold. From the Middle Eat eastward metric measurements are used against 0.9999 quality gold. [Please note that the 0.5% difference in price can be accounted for by the higher quality of Shanghai’s gold on which their gold price is based over London’s ‘good delivery’ standard of 0.995.]

 Shanghai gold prices corrected this morning. While we cannot get access to today’s Shanghai’s Fixings, gold was trading down, between $1,191 and $1,196 or back to 263.73 Yuan and 264.83 Yuan. After the gold price rises in Shanghai during this week, a correction was needed to make the market healthy.

With this correction London and New York are now higher than Shanghai [see note below table].

LBMA price setting:  The LBMA gold price setting was at $1,196.35 this morning against yesterday’s $1,206.65. 

The gold price in the euro was set higher at €1,123.54 after yesterday’s €1,133.96 as the dollar weakened.

Ahead of the opening of New York the gold price was trading at $1,198.00 and in the euro at €1,125.15.  At the same time, the silver price was trading at $16.80. 

Silver Today –Silver closed at $16.78 at New York’s close yesterday from $16.73 on the 11th January. 

 Price Drivers

With no sales or purchases into or out of the U.S. based gold ETFs yesterday we expect week’s end in both London and New York to be neutral with a likelihood of a correcting price. The psychological $1,200 will cause the gold price to pause as it is doing now. But we feel $1,200 will not be a significant barrier.

The dollar is stabilizing today but for how long? The exuberant expectations, discounted in markets, of what a President Trump will bring are dissipating and the dollar is losing momentum. If it falls back to below 100 on the index then we expect it to weaken further, benefitting gold.

India

It is clear that Modi’s attack on “Black Money” has failed, as 97% of the Rs.500 and Rs.1,000 notes have been collected by the banks. We had expected that not just because of the ingenuity of the Indians but because overall government and its bureaucrats are inherently corrupt, despite Modi’s noble efforts. Indians will remain a cash society against government efforts to see into their businesses because of cash being so difficult to monitor.

We expect gold to be bought with the new notes and hidden away, as before. No statistics issued by the government on gold imports of late, will be accurate now as the buying undoubtedly went through smugglers.

With Indian seasonal demand set to continue until May, we do expect to see ‘legal’ demand figures to be on the rise from now on. Overall gold demand in India is resuscitating now.

Gold ETFs – Yesterday, in New York, there were no sales or purchases from the SPDR gold ETF or any from or into the Gold Trust, leaving their respective holdings at 804.996 tonnes and 198.30 tonnes. 

As we said in an earlier report, “Substantial sales of gold on a daily basis are needed for New York to control the gold price”.

Since January 4th 2016, 202.416 tonnes of gold has been added to the SPDR gold ETF and to the Gold Trust.  We remain at almost at half the total level accumulated in 2016.

Julian D.W. Phillips GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

Dollar down against gold; gold up against all currencies

Gold Today –New York closed at $1,190.90 on the 11th January after closing at $1,187.20 on the 10th January. London opened again at $1,204.75 today.

 Overall the dollar is weaker against global currencies today. Before London’s opening:

         The $: € was weaker at $1.0631: €1 from $1.0554: €1 yesterday.

         The Dollar index was weaker at 101.25 from 102.09 yesterday. 

         The Yen was stronger at 114.52: $1 from yesterday’s 116.05 against the dollar. 

         The Yuan was stronger at 6.9115: $1, from 6.9225: $1, yesterday. 

         The Pound Sterling was stronger at $1.2249: £1 from yesterday’s $1.2156: £1.

 Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    1    12

     2016    1    11

      2016  12    10

SHAU

SHAU

SHAU

/

268.72

267.22

/

269.00

268.41

$ equivalent 1oz @  $1: 6.9115

      $1: 6.9225

$1: 6.9244

  /

$1,209.31

$1,200.65

/

$1,210.57

$1,205.99

Please note that the Shanghai Fixes are for 1 gm of gold. From the Middle Eat eastward metric measurements are used against 0.9999 quality gold. [Please note that the 0.5% difference in price can be accounted for by the higher quality of Shanghai’s gold on which their gold price is based over London’s ‘good delivery’ standard of 0.995.]

 Shanghai continues to lead the way for the gold price. And as happened yesterday London and New York rose too. With Shanghai prices continuing to rise we expect London and New York to rise  again too. To catch Shanghai up, prices in New York need to rise another $15. London is now in line with yesterday’s Shanghai gold price.

LBMA price setting:  The LBMA gold price setting was at $1,206.65 this morning against yesterday’s $1,187.55. 

The gold price in the euro was set higher at €1,133.96 after yesterday’s €1,128.31 as the dollar weakened.

Ahead of the opening of New York the gold price was trading at $1,204.20 and in the euro at €1,131.55.  At the same time, the silver price was trading at $16.89. 

Silver Today –Silver closed at $16.73 at New York’s close yesterday from $16.79 on the 10th January. 

 Price Drivers

The dollar is weaker today with the media attributing that to Trump’s failure to describe his financial policies.  What appears to be happening is that the honeymoon with the Trump Presidency is over, before it began. But, as we described yesterday, such temporary news in the U.S. did not cause the buyers of gold to rush out and buy in the U.S. Most of the buying occurred in China yesterday, with no movement whatsoever in the U.S. based gold ETFs.

The rise in the gold price in dollars was in fact the fall of the dollar reflected in a higher dollar gold price together with Chinese demand as reflected in the Yuan gold prices [above].

Should U.S. investors return to the gold market as buyers of physical gold [via gold ETFs in particular], the additional demand from the U.S. will drive gold and silver prices much higher! Should demand from India, once Indians have usable cash again, their additional demand will add to the upward pressures on the gold price. We see Chinese demand driving gold prices higher alongside falling currency values.

Gold ETFs – Yesterday, in New York, there were no sales or purchases from the SPDR gold ETF (GLD) or any from or into the Gold Trust (IAU), leaving their respective holdings at 804.996 tonnes and 198.30 tonnes. 

As we said in an earlier report, “Substantial sales of gold on a daily basis are needed for New York to control the gold price”.

Since January 4th 2016, 202.416 tonnes of gold has been added to the SPDR gold ETF and to the Gold Trust.  We remain at almost at half the total level accumulated in 2016.

Julian D.W. Phillips 

 GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

Will Shanghai pull gold price through $1,200?

Gold Today –New York closed at $1,187.20 on the 10th January after closing at $1,182.50 on the 9th January. London opened again at $1,190.40 today.

 Overall the dollar is stronger against global currencies today. Before London’s opening:

         The $: € was stronger at $1.0554: €1 from $1.0611: €1 yesterday.

         The Dollar index was stronger at 102.09 from 101.66 yesterday. 

         The Yen was weaker at 116.05: $1 from yesterday’s 115.40 against the dollar. 

         The Yuan was stronger at 6.9225: $1, from 6.9244: $1, yesterday. 

         The Pound Sterling was slightly stronger at $1.2156: £1 from yesterday’s $1.2150: £1.

 Yuan Gold Fix

Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    1    11

     2016    1    10

      2016  12    9

SHAU

SHAU

SHAU

/

267.22

265.27

/

268.41

265.71

$ equivalent 1oz @  $1: 6.9225

      $1: 6.9244

$1: 6.9329

  /

$1,200.65

$1,191.56

/

$1,205.99

$1,193.53

Please note that the Shanghai Fixes are for 1 gm of gold. From the Middle Eat eastward metric measurements are used against 0.9999 quality gold. [Please note that the 0.5% difference in price can be accounted for by the higher quality of Shanghai’s gold on which their gold price is based over London’s ‘good delivery’ standard of 0.995.]

 If Shanghai is leading the way for the gold price, we would expect London and New York to rise too. Consequently, the gold price needs to move to $1,200 for it to be in line with Shanghai now.

Shanghai on Tuesday was $13 higher than the close of New York. This morning London opened only $10.59 lower than yesterday’s Shanghai closing. And this strength in gold is happening while the dollar is rising and the Yuan slipping slightly.

Meanwhile the People’s Bank of China has reported a fall in its gold reserves of in December by 20.98 tonnes. Is this a change in direction of the PBoC? We don’t accept that for a second.  The Chinese authorities are rarely clear on such subjects and often don’t give a full picture of their situation, as it is not in their interests to do so. So this figure could be some sort of window dressing for our benefit. We know they use two agencies to hold gold on their behalf until it suits them to take the gold into reserves. They could easily have handed it back to the non-reporting one on a temporary basis. What we do know is that it is illegal to export gold from China. We also know that the SGE itself can hold gold and does not disclose it.

LBMA price setting:  The LBMA gold price setting was at $1,187.55 this morning against yesterday’s $1,183.20. 

The gold price in the euro was set higher at €1,128.31 after Friday’s €1,117.60 as the dollar strengthened.

Ahead of the opening of New York the gold price was trading at $1,188.15 and in the euro at €1,131.46.  At the same time, the silver price was trading at $16.77. 

Silver Today –Silver closed at $16.79 at New York’s close yesterday from $16.57 on the 9th January. 

Price Drivers

We decided to look at the gold market through the eyes of a non-professional at the gold market. It quickly became clear just how easy it was to be informed in a way that distorted the true picture and confuse investors.

For instance, when you hear that gold rose x% in sterling or y% in the dollar, that ignores the fact that the gold market is a global market where prices reflect the global market demand and supply eventually.

We would prefer to see, “the dollar fell against gold, or sterling fell against gold”, a reflection of currency performance, not gold’s performance.

As you have read in these reports the gold price is rising in all currencies at the moment, with both London and New York trying to catch up to Shanghai prices. New York and London have not moved up because of what Prime Minister May said, but that gold prices in sterling rose because of the pound’s fall.

No event in the U.S. has caused gold to move up this week. It has moved up because of global demand and supply factors. In China demand for gold is robust. In the U.S. there was a very big sale [nearly 9 tonnes] of gold in one day earlier this week, so if the gold price was driven by U.S. factors alone, the gold price would have fallen. It didn’t, it rose!

After all gold is a currency, it is both an asset and cash, globally.  

Relevant factors to the global gold price must not be local factors, unless they globally affect the gold price. Most that are attributed to moving the gold price just aren’t.

That’s why understanding just where gold’s pricing power lies is so important.

That’s why understanding currencies is so critical to understanding the gold price.

Gold ETFs – Yesterday, in New York, there were no sales from the SPDR gold ETF or any from the Gold Trust, leaving their respective holdings at 804.996 tonnes and 198.30 tonnes. 

As we said in an earlier report, “Substantial sales of gold on a daily basis are needed for New York to control the gold price”.

Julian D.W. Phillips 

 GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

Shanghai, London and New York gold prices aligning

Gold Today –New York closed at $1,182.50 on the 9th January after closing at $1,173.40 on the 6th January. London opened again at $1,185.15 today.

 Overall the dollar is weaker against global currencies today. Before London’s opening:

         The $: € was weaker at $1.0611 €1 from $1.0532: €1 yesterday.

         The Dollar index was weaker at 101.66 from 102.36 yesterday. 

         The Yen was stronger at 115.47: $1 from yesterday’s 117.40 against the dollar. 

         The Yuan was stronger at 6.9244: $1, from 6.9329: $1, yesterday. 

         The Pound Sterling was weaker at $1.2150: £1 from yesterday’s $1.2185: £1.

 Yuan Gold Fix

Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    1    10

     2016    1    9

      2016  12    6

SHAU

SHAU

SHAU

/

265.27

265.17

/

265.71

264.97

$ equivalent 1oz @  $1: 6.9244

      $1: 6.9329

$1: 6.9211

  /

$1,191.56

$1,189.65

/

$1,193.53

$1,188.75

Please note that the Shanghai Fixes are for 1 gm of gold. From the Middle Eat eastward metric measurements are used against 0.9999 quality gold. [Please note that the 0.5% difference in price can be accounted for by the higher quality of Shanghai’s gold on which their gold price is based over London’s ‘good delivery’ standard of 0.995.]

 Again New York’s prices are moving up towards Shanghai’s, which continues to rise steadily but solidly.  Shanghai on Monday was only $6.50 higher than the close of New York. This morning London opened only $3.50 lower than Shanghai. The weaker dollar is impacting the gold price, to the relief of the People’s Bank of China.

LBMA price setting:  The LBMA gold price setting was at $1,183.20 this morning against yesterday’s $1,176.10. 

The gold price in the euro was set higher at €1,117.60 after Friday’s €1,117.54.

Ahead of the opening of New York the gold price was trading at $1,184.15 and in the euro at €1,118.71.  At the same time, the silver price was trading at $16.61. 

Silver Today –Silver closed at $16.57 at New York’s close yesterday from $16.51 on the 6th January. 

Price Drivers

As you can see below, another very large sale of physical gold took place in New York and is no doubt finding its way to China. The fact that the gold price ignored this sale and took prices higher, as the dollar weakened, is significant. As you know, we are watching to see if pricing power now sits with Shanghai. New York’s price reaction to the large sale of gold, confirms again that it does.

It does appear that the developed world’s gold world has not yet noticed these changes. We feel that they are the most important structural changes the gold world has seen since 1971. Please note, you’re reading it here first!

India – The shortage of cash in India persists and may continue until May. We are beginning to wonder if this was not a mistake by the government, or an attempt to force Indians to go electronic with their money. This may have happened with the middle classes, but the poor, who are not able to go electronic, continue to suffer unreasonably.  We are of the opinion that ‘Black Money’ will survive this attack as it is deeply embedded in the Indian culture. Likewise, a distrust of government, corrupt bureaucrats and the fear of disclosure of individual’s true financial positions will ensure its survival.

Gold ETFs – Yesterday, in New York, there were very large sales of 8.595 tonnes from the SPDR gold ETF but there were no sales from the Gold Trust, leaving their respective holdings at 804.996 tonnes and 198.30 tonnes. 

It is very notable that this had absolutely no impact on the gold price. If this happens many more times, we can expect to see the very large short positions on COMEX be closed in a rush. It is a battle now, between east and west and east is winning at the moment!

Julian D.W. Phillips 

 GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

A bullish case for gold for 2017

By Frank Holmes – CEO and Chief Investment Officer – US Global Investors

Gold miners ended 2016 up 55%

You could say gold miners struck gold in 2016. The group, as measured by the NYSE Arca Gold Miners Index, finished the year up an amazing 55 percent, handily beating all other asset classes shown below.

Gold Miners Were the Best Performing Asset in 2016
click to enlarge

Miners were followed by commodities at 25 percent and silver at 15 percent. Gold finished up 8.6 percent, its first positive year since 2012, when it gained 7.1 percent. (Keep your eyes peeled for our forthcoming annual periodic table of commodity returns, one of our perennially popular pieces!)

I find it curious that many in the financial media continue to have a bias against gold, even though it generated better returns in 2016 than 10-year Treasuries and the U.S. dollar, which performed half as well. And when it was up as much as 28 percent in the summer, they still didn’t have anything positive to say, arguing it had gone up too much.

(Gold traders, on the other hand, have a much different opinion about the metal right now. A group of traders recently surveyed by Bloomberg revealed they are the most bullish on gold since the end of 2015, soon before it rallied in its best first half of the year since 1974. The traders cited geopolitical concerns, both in the U.S. and Europe, as well as stronger demand in 2017.)

President Obama: We are all now rooting for Trump's success.

And isn’t it interesting that the same media figures who are biased against gold are usually the same ones who seem to have only disparaging things to say about Brexit and President-elect Donald Trump? What they don’t realize is that if Brexit and Trump succeed, so too do the U.K. and the U.S. Are they hoping Brexit and Trump will fail so they can be proved right?

The smart people realize personal politics must be put aside. Despite supporting Hillary Clinton during the primaries, Warren Buffett now says he is behind the president-elect—because he knows that if the U.S. does well, he does well too. Despite campaigning hard against Trump, President Barack Obama says now we should all be rooting for Trump, regardless of our politics.

Negative Real Rates Should Drive Gold Prices

But back to gold. Coming up on January 28, we have the Chinese New Year, when demand for the yellow metal historically has risen, along with prices. This will be the year of the fire rooster, one of whose lucky colors is gold.

Throughout 2017, the precious metal should be supported by even deeper negative real rates, which could fall to their lowest level in two years as inflation outpaces nominal interest rate increases, according to UBS. In October, Federal Reserve Chair Janet Yellen suggested there might be some benefit in allowing inflation to exceed the central bank’s target rate of 2 percent before another hike is considered, which is good news for gold. Numerous times in the past I’ve shown that the yellow metal has tended to rise when real rates—what you get when you subtract inflation from the federal funds rate—fell into negative territory.

Gold Should Be Supported by Even Deeper Negative Real Rates
click to enlarge

“Federal Reserve interest rate hikes could weigh on gold prices in the near term,” according to UBS’s house view. “But as real rates fall more deeply into negative territory through the next year, we expect prices to rise toward $1,350 an ounce.”

Gold Extremely Undervalued

Since Election Day, domestic stocks have rallied 6.5 percent while gold has dropped as much as 7.6 percent. What this means is gold is looking extremely undervalued compared to the S&P 500, which should appeal to value investors.

Look at the gold-to-S&P 500 ratio below. The lower the ratio, the more undervalued the metal is compared to blue-chip stocks. In fact, gold is at its most undervalued in at least 10 years right now.

Gold Most Undervalued in at Least 10 Years
click to enlarge

Technically, gold still appears oversold, down almost one standard deviation now. As you can see, it’s moving back to its mean for the 60-day period, but there’s still time to capture potential growth.

Gold is Reverting back to the mean
click to enlarge

Shanghai beginning to dominate global gold pricing

Gold Today –New York closed at $1,173.40 on the 6th January after closing at $1,181.20 on the 5th January. London opened again at $1,178.20 today.

Overall the dollar is stronger against global currencies today. Before London’s opening:

         The $: € was stronger at $1.0532 €1 from $1.0596: €1 Friday.

         The Dollar index was stronger at 102.36 from 101.61 Friday. 

         The Yen was weaker at 117.40: $1 from Friday’s 116.08 against the dollar. 

         The Yuan was weaker at 6.9329: $1, from 6.9211: $1, Friday. 

         The Pound Sterling was weaker at $1.2185: £1 from Friday’s $1.2386: £1.

 Yuan Gold Fix

Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    1    9

     2016    1    6

      2016  12    5

SHAU

SHAU

SHAU

/

265.17

264.76

/

264.97

264.87

$ equivalent 1oz @  $1: 6.9329

      $1: 6.9211

$1: 6.8874

  /

$1,189.65

$1,185.75

/

$1,188.75

$1,196.15

Please note that the Shanghai Fixes are for 1 gm of gold. From the Middle Eat eastward metric measurements are used against 0.9999 quality gold. [Please note that the 0.5% difference in price can be accounted for by the higher quality of Shanghai’s gold on which their gold price is based over London’s ‘good delivery’ standard of 0.995.]

 As you can see above Friday’s Shanghai nprices were $11.25 higher than the close of New York and only $5 higher than London. The People’s Bank of China’s efforts to hold the Yuan up appear to be failing as it falls.

LBMA price setting:  The LBMA gold price setting was at $1,176.10 this morning against yesterday’s $1,178.00. 

The gold price in the euro was set higher at €1,117.54 after Friday’s €1,113.16.

Ahead of the opening of New York the gold price was trading at $1,178.05 and in the euro at €1,119.82.  At the same time, the silver price was trading at $16.51. 

Silver Today –Silver closed at $16.51 at New York’s close Friday from $16.62 on the 5th January. 

Price Drivers

Shanghai’s price performance continues to lead the way higher with London following with more enthusiasm than New York. Can New York operate independently of London? No!

London is the developed world’s heart of the physical gold market. New York is the paper market. ‘Paper gold prices’ cannot overrule physical prices. It seems obvious, but it isn’t as COMEX has dominated gold prices [with the support of physical sales into London] for several years. As we saw over the weekend COMEX pulled prices down after Shanghai had lifted them in the morning before New York opened. But London took them back up to within $5 of Shanghai prices [allowing for the difference in the quality of gold being priced – $5].

Since Shanghai penalized speculators by halving the contract amounts to 500 kg on January 1st, the cost of speculation has jumped significantly there. Hence it is more difficult to profit from short-term moves in the gold price. This is reducing speculation in China. This in turn reduces volatility and the width of daily moves in the global gold price. Overall, not only does it make it costly to speculate, it reduces the profitability of speculation.

In turn, we do expect the dominance over the gold price to stay in Shanghai and we expect both London and New York to move much close to Shanghai prices not the other way around.

Gold ETFs – Friday in New York, there were no sales from the SPDR gold ETF but there was a purchase of 0.9 of a tonnes into the holdings of the Gold Trust, leaving their respective holdings at 813.591 tonnes and 198.30 tonnes. 

Last week saw net purchases into the Gold Trust of over a tonne.

Since January 4th this year, 211.011 tonnes of gold has been added to the SPDR gold ETF and to the Gold Trust.  We remain at almost at half the level accumulated in 2016.

Julian D.W. Phillips 

 GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

SP ARTICLE – LINK NOT WORKING: GATA Points to ‘Proof’ of Gold Price Suppression Intent

The link on the Sharps Pixley website to the above article doesn’t seem to be working and  readers can’t access it at the moment, so here’s a second copy of the original article:

GATA Points to ‘Proof’ of Gold Price Suppression Intent

It has long been claimed that the gold price, along with virtually every other traded market, is manipulated by financial interests which can lay hands on sufficient funds, or credit, to be able to do so.  That is an unfortunate aspect of the capitalist system and tends to benefit the big money, mostly at the expense of the small investor.  But since its formation in 1998 the Gold Anti-Trust Action Committee (GATA) has gone a stage further with its claims that not only is the gold price manipulated (which suggests it can be pushed up as well and down), but that there is collusion by big money (mainly the bullion banks), central banks and governments to go a stage further and keep the gold price SUPPRESSED, given that a rising gold price is seen by the financial markets as a sign of weakness in the almighty dollar and in the global economy.  That runs counter to the impression that governments wish to portray.

From time to time GATA has also managed to acquire documents which support its point of view in terms of memos from some key figures, particularly from the US Treasury and Federal Reserve, which would appear to support the idea of a gold price suppression policy.  And now it has just been involved in publishing a document, dating back to the early 1970s, which has just appeared in the TF Metals Report, citing a cable obtained by Wikileaks.

The cable, according to GATA, suggested that the U.S. gold futures market was created in December 1974 as a result of collusion between the US government and gold dealers in London to facilitate volatility in gold prices and thereby discourage gold ownership by US citizens.  That is perhaps an arguable contention as it perhaps rather points out the consequences of a change in US policy in allowing citizens to own gold.

The cable was sent to the State Department from the US Embassy in London and describes the embassy’s extensive consultations with London bullion dealers about the imminent re-legalization of gold ownership in the United States and possible substantial gold purchases by oil-exporting Arab nations.

The cable reads: “The major impact of private U.S. ownership, according to the dealers’ expectations, will be the formation of a sizable gold futures market. Each of the dealers expressed the belief that the futures market would be of significant proportion and physical trading would be minuscule by comparison. Also expressed was the expectation that large-volume futures dealing would create a highly volatile market. In turn, the volatile price movements would diminish the initial demand for physical holding and most likely negate long-term hoarding by U.S. citizens.

The cable is interesting not just for confirming the assertions by GATA and others in the gold-price suppression camp that futures markets also function as mechanisms of commodity price suppression and support for government currencies, an assertion perhaps first made comprehensively in 2001 by the British economist Peter Warburton, but also for showing the close connection at the time between the U.S. government and London-based gold dealers and producers, some of which are cited by name.  Those cited include Samuel Montagu & Co., Sharps Pixley & Co., Mocatta & Goldsmid, and Consolidated Gold Fields.  The first three mentioned were at the time London’s largest bullion dealers and the latter was in effect, mainly through its South African subsidiaries and associates, the world’s largest miner of gold.

It should be noted, however that none of the above cited companies exist in their original form nowadays, and, except perhaps for Mocatta’s successor, can  no longer be considered part of any grouping which exerts any significant effect on the gold price today.  The following is a note to set the record straight on this given that the companies quoted may well have had a major influence in the markets around four decades ago.

Thus, Samuel Montagu is no longer a bullion dealer/broker, but now just forms part of the private banking service of HSBC. The name was actually last used by HSBC in 2000. But its former precious metals broking activities will now form part of HSBC’s continuing business – but not under the Samuel Montagu name.

Sharps Pixley was bought by Kleinwort Benson and then by Deutsche Bank which effectively closed it down.  Subsequently the name was acquired by current CEO, Ross Norman, who relaunched the company around six years ago as a website portal to sell gold in UK markets, as well as providing news and information about the precious metals markets. In 2013 Sharps Pixley was acquired by Degussa Goldhandel from Germany which claims to be one of the largest sellers of retail physical gold in Europe, but the Sharps Pixley end is still run by Ross Norman.  It recently launched a state of the art retail bullion shop/outlet in London’s prestigious St. James Street.

Mocatta & Goldsmid is now ScotiaMocatta, the precious metal and base metal banking division of the  Bank of Nova Scotia, while Consolidated Gold Fields was originally the controlling entity for the gold mining company that is now Gold Fields of South Africa.

The abovementioned cable from the US Embassy in the UK to the State Department perhaps does not quite provide ‘proof’ of US Government involvement in actual gold price suppression, but is yet another piece of circumstantial evidence that it was certainly aware of the likely effects of the futures market on the gold price pattern and may well have colluded in this as being in its best interests.

 

SGE Gold Withdrawals 2016 – Big drop from 2015

The SGE has now published its December figure for gold withdrawals from the Exchange brining the 2016 total to a shade over 1,970 tonnes – around 24% down on the record 2015 figure – see Table below:

Table: Shanghai Gold Exchange Monthly Gold Withdrawals (Tonnes)

Month 2016 2015 2014 % change 2015-2016 % change 2014-2016
January 225.08 255.42 246.00 – 11.8%  -8.5%
February* 107.60 156.36 171.67 – 31.2% -37.3%
March 183.24 213.35 146.56 -14.1% +25.0%
April 171.40 195.45 129.59 -12.3% +32.2%
May 147.28 162.15 129.34 -9.2% +13.8%
June 138.51 195.67 128.03 – 29.2% +8.2%
July 117.58 285.50 137.53 – 58.8% -14.4%
August 144.44 265.27 161.95 – 45.6% -10.8%
September 170.90 259.98 202.43  -34.3% -15.6%
October  153.25 176.29 201.11  -13.1%  -23.8%
November  214.72 202.71 212.49  +5.9%  +1.0%
December  196.37 228.21 235.66  -13.9%  -16.7%
Full Year  1,970.37 2,596.37 2,102.36  -24.1%  -6.3%

Source: Shanghai Gold Exchange, Lawrieongold.com

For commentary on the latest SGE figures I’ve published an article on the Sharps Pixley website.  To read it click on: 2016 SGE gold withdrawals lowest for four years

 

Remarkable gold price performer Shanghai key price driver

Gold Today –New York closed at $1,181.20 on the 5rd January after closing at $1,163.50 on the 3rd January. London opened again at $1,176.15 today.

 Overall the dollar is weaker against global currencies today. Before London’s opening:

         The $: € was weaker at $1.0596 €1 from $1.0503: €1 yesterday.

         The Dollar index was weaker at 101.61 from 102.36 yesterday. 

         The Yen was stronger at 116.08: $1 from yesterday’s 116.66 against the dollar. 

         The Yuan was stronger at 6.9211: $1, from 6.8874: $1, yesterday. 

         The Pound Sterling was stronger at $1.2386: £1 from yesterday’s $1.2319: £1.

 Yuan Gold Fix

Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    1    6

     2016    1    5

      2016  12    4

SHAU

SHAU

SHAU

/

264.76

264.27

/

264.87

264.77

$ equivalent 1oz @  $1: 6.9211

      $1: 6.8874

$1: 6.9321

  /

$1,195.66

$1,185.75

/

$1,196.15

$1,187.90

Please note that the Shanghai Fixes are for 1 gm of gold. From the Middle Eat eastward metric measurements are used against 0.9999 quality gold. [Please note that the 0.5% difference in price can be accounted for by the higher quality of Shanghai’s gold on which their gold price is based over London’s ‘good delivery’ standard of 0.995.]

 Yesterday the People’s Bank of China stepped into the foreign exchange market to try to restrain the fall in the Yuan and managed to pull the Yuan higher with it reaching 6.86 at one point. But as you can see this has been short-lived as the currency sank back to 6.9211 today, despite a weaker dollar. The recent fall in the Yuan has been due to a strong dollar and not a weak Yuan. But China is conscious of the Trumped up charge that it is a ‘currency manipulator’. The evidence is otherwise with the Yen, euro and sterling providing more evidence of such than China.

But what is of importance to gold investors is the continuing steady but solid small gains being shown in the gold price in the Yuan. It is still within the 264 a gram level, where it has been throughout this week. Translating those prices into the dollar shows that the stronger Yuan made it look as though the gold price had jumped significantly in Shanghai, but it was simply a reflection of a stronger Yuan against the dollar. [See yesterday’s commentary on currency and gold price moves]  

Meanwhile the New York prices continue to rise faster than Yuan prices lowering the difference to $10 and in London the difference is now at $15 a change from London’s difference being smaller than New York’s. It is clear that Shanghai’s gold prices are leading global gold markets now.

LBMA price setting:  The LBMA gold price setting was at $1,178.00 this morning against yesterday’s $1,173.05. 

The gold price in the euro was set higher at €1,113.16 after yesterday’s €1,116.98.

Ahead of the opening of New York the gold price was trading at $1,176.70 and in the euro at €1,111.98.  At the same time, the silver price was trading at $16.45. 

Silver Today –Silver closed at $16.62 at New York’s close yesterday from $16.43 on the 4th January. 

 Price Drivers

Shanghai ‘s price performance is remarkable. We have been waiting and watching to see if that gold market would assert itself over London and New York. In the last week, the first week of trading in 2017, we now have clear evidence that it is doing so.

Until now we received constant reports that Shanghai was at a ‘premium’ to London and New York. This implies that Shanghai was the market out of sync with those markets. It seemed as if Shanghai did not have stock as it was dependent on the others for supply and would come into line once that problem was solved. It seemed as if Shanghai prices were peculiar to that market. This left COMEX prices heavily influencing London while its ‘paper’ market, COMEX dominated prices. The last week has changed that picture!

Shanghai gold prices have moved higher steadily and driven by currency moves, London and New York have been more volatile. But London and New York have risen close to levels of Shanghai, not Shanghai prices falling back. With Chinese prices holding so steady we see gold prices reflecting currency moves like a mirror.

This promises a less volatile [actual] gold price in 2017 more and more reflecting global physical demand and supply.

It suggests that investors and traders, in the future examine currency prospects more than gold demand and supply, to see where gold prices in different currencies are going.  

Gold ETFs – Yesterday in New York, there were sales of 0.28 of a tonne from the SPDR gold ETF and there was a purchase of 0.79 of a tonnes into the holdings of the Gold Trust, leaving their respective holdings at 813.591 tonnes and 197.40 tonnes. 

Yesterday saw net purchases into these two gold ETFs of 0.51 of a tonne, the second day of net purchases into gold ETFs!

Julian D.W. Phillips 

 GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

Precious metals outlook 2017

By Clint Siegner*

Precious metals had a wild ride in 2016, launching higher in the first half of the year and then falling much of the way back to earth in the second half. Our outlook for 2017 hinges on some of the drivers that figured prominently in last year’s trading. There are also a couple of new wrinkles.

Europe

We’ll start with some fundamentals that metals investors have become well acquainted with in recent years. The troubles plaguing Europe seem to be forgotten, but they certainly aren’t gone. The question is whether or not officials in Europe will be able to keep the wheels on in 2017.

Several major European banks remain in jeopardy, plagued by bad debts, too much leverage, and mounting legal expenses. Germany’s Deutsche Bank (DB) was often in the headlines last year as its share prices made all-time lows. Deutsche Bank paid out $60 million to settle charges of manipulating the gold market.

Tattered EU Flag

In addition, regulators in the U.S. had proposed a crushing $14 billion fine related to the bank’s marketing of dodgy mortgage backed securities prior to the 2008 financial crisis.

Since then share prices have recovered significantly. The bank agreed last month to a settlement of just over $7 billion, roughly half the amount originally proposed but still a hefty penalty. The bank’s loan book still looks ugly and its exposure to risky derivatives remains a wild card.

The recent failure of Italy’s third largest bank – Monte dei Paschi – may put the spotlight back on the European banking sector. Particularly if other institutions, such as Deutsche Bank, have been aggressively selling credit default swaps they will now have to pay out on.

Investors grappled with the Brexit referendum in 2016. This year they will find out if Britain’s vote to leave the EU will actually get implemented. Negotiations around the departure are expected to commence in May.

Italians are going to select a new government shortly and there are elections coming up in Germany, France, and the Netherlands in the months ahead. Anti-European Union forces are making real headway in the polls.

This year looks pivotal for the EU, the euro as its currency, and its banks. Turmoil there will boost safe haven buying in precious metals and the U.S. dollar. Alternatively, should the establishment and the banks weather the storm, metal prices could suffer, at least in terms of euros. Right now, turmoil in Europe looks like the better bet.

The Fed

Once again markets enter a new year in thrall to Janet Yellen and the rest of the Federal Open Market Committee. Like last year, we just had one rate hike. Officials are telegraphing three to four additional hikes in the coming 12 months.

Last time around the stock market suffered stimulus withdrawals. Fed officials threw in the towel and reversed course almost immediately. We can expect officials are watching equity prices carefully now. If the S&P 500 keeps powering ahead, they’ll have the cover they need to deliver rate increases.

United States Federal Reserve System

If, on the other hand, we find out that markets are still addicted to low rates and officials can’t tolerate the pain of a withdrawal it will be bad news for the dollar and good news for metals.

A Donald Trump Presidency

The election of Donald Trump is what makes this year different. Many people are optimistic about the prospects for a major infrastructure program, tax cuts, and less regulation. Investors are ready to take on risk. Since the election, they have been mostly getting out of safe haven assets such as bonds and gold, while paying top dollar for stocks.

The rub is that Trump has yet to assume office. The expectations are high and, frankly, something has to give. Trump might deliver a big infrastructure program and some tax relief. However, that would spell trouble for the current dollar rally as people anticipate ballooning deficits and borrowing.

Or, Trump may find his proposed measures are easier said than done. Republicans control Congress, but there is no certainty they will accept big spending increases and even higher deficits. If optimism bumps up against a bleaker political reality, it’ll be bad news for investors playing the Trump rally.

Conclusion

2016 closed with investors positioning for smooth sailing and economic growth. They may get it but a number of things will have to go right. If they don’t, jettisoning safe haven assets to buy stocks at record high valuations won’t look like a very good idea.