Gold breaches $1,300 albeit briefly

Gold Today –New York closed yesterday at $1,288.70. London opened at $1,293.15 today. 

Overall the dollar was weaker against global currencies, early today. Before London’s opening:

         The $: € was weaker at $1.1750 after the yesterday’s $1.1743: €1.

         The Dollar index was weaker at 93.47 after yesterday’s 93.64

         The Yen was stronger at 109.05 after yesterday’s 110.02:$1. 

         The Yuan was weaker at 6.6769 after yesterday’s 6.6713: $1. 

         The Pound Sterling was stronger at $1.2896 after yesterday’s $1.2887: £1

Yuan Gold Fix
Trade Date     Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    8    18

     2017    8    17           

     2017    8    16

SHAU

SHAU

SHAU

/

277.29

274.83

Trading at 278.0

277.03

274.62

$ equivalent 1oz at 0.995 fineness

@   $1: 6.6769

       $1: 6.6713

       $1: 6.6926     

  /

$1,287.80

$1,272.26

Trading at $1,290.03

$1,286.59

$1,271.28

Please note that the Shanghai Fixes are for 1 gm of gold. From the Middle East 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.]

 New York closed $2.00 higher than Shanghai’s close yesterday. Then today sees Shanghai jumping to $1.33 higher than New York’s close before London opened nearly a $3.12 higher than Shanghai, as the dollar continued its fall and real demand for gold was seen.

All three global gold centers continue to react to the falling dollar today. This is about the dollar once again. There appears to be an effort to curb the euro’s rise, with Draghi saying the euro may be overheating.

The market consensus is that the euro could rise above $1.20.If that happens and the gold price reflects such a rise, then we would see a dollar gold price of $1,317, well above long term resistance.

Silver Today –Silver closed at $17.05 yesterday after $16.94 at New York’s close Wednesday.

LBMA price setting:  The LBMA gold price was set today at $1,295.25 from yesterday’s $1,285.90.  The gold price in the euro was set again at €1,102.72 after yesterday’s €1,098.78.

Just before the opening of New York the gold price was trading at $1,296.00 and in the euro at €1,103.82. At the same time, the silver price was trading at $17.22. After New York opened gold briefly breached the $1,300 psychological level before being brought back down the the mid-$1290s again.

Price Drivers

The dollar is falling once more, but not precipitously. It will lead to higher gold prices if it continues. This is being reflected in today’s prices. There is strength to the rise in gold price that we had not seen before in the previous attacks on $1,300. The causes are solid too. These are; an overvaluation of the dollar, a resuscitation of U.S. demand for physical gold, a dearth of sellers of gold, Shanghai’s demand for gold remains strong as it does in London!

While we rarely attribute gold price rises to political stories and the like, we do feel that the disappointment at President Trump’s efforts to bring great economic changes to the U.S. is resulting in bearish sentiment on the dollar, U.S. equities and the future of interest rate rises.

His abrasive attacks, on all fronts, appear to have undermined his hopes of achieving great things. It does look like the government in the U.S. is unable to rule effectively, at the moment, due to partisan infighting and lack of support amongst even the Republican Party. This is supportive of higher gold prices as U.S. institutional investors advocate a 10% – 15% holding in gold.

Gold ETFs – Yesterday there were no purchases or sales into the SPDR gold ETF or the Gold Trust yesterday. The SPDR gold ETF and Gold Trust holdings are at 795.443 tonnes and at 213.28 tonnes respectively.

Since January 4th 2016, 171.08 tonnes of gold have been added to the SPDR gold ETF and to the Gold Trust. 

Since January 6th 2017, 9.114 tonnes have been added to the gold ETFs we follow.

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

Gold rises, dollar falls, on FOMC minutes consideration

Gold Today –New York closed yesterday at $1,282.90. London opened at $1,288.10 today. 

Overall the dollar was weaker against global currencies, early today. Before London’s opening:

         The $: € was weaker at $1.1743 after the yesterday’s $1.1725: €1.

         The Dollar index was stronger at 93.64 after yesterday’s 93.89

         The Yen was weaker at 110.02 after yesterday’s 110.86:$1. 

         The Yuan was much stronger at 6.6713 after yesterday’s 6.6926: $1. 

         The Pound Sterling was almost unchanged at $1.2887 after yesterday’s $1.2883: £1

Yuan Gold Fix
Trade Date     Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    8    17

     2017    8    16           

     2017    8    15

SHAU

SHAU

SHAU

/

274.83

274.93

Trading at 277.2

274.62

274.81

$ equivalent 1oz at 0.995 fineness

@   $1: 6.6713

       $1: 6.6926

       $1: 6.6792     

  /$1,272.26

$1,275.28

Trading at $1,287.38$1,271.28

$1,274.73

Please note that the Shanghai Fixes are for 1 gm of gold. From the Middle East 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.]

 New York closed $11.38 higher than Shanghai’s close yesterday. Then today sees Shanghai jumping to $4.48 higher than New York’s close before London opened nearly a $1.00 higher than Shanghai, as the dollar started to resume its fall.

All three global gold centers are reacting to the falling dollar today. What is of great interest is that the concept of Shanghai having a “premium” over London is just about dead. We are seeing a truly global gold price now, both ways. We have no doubt now that global gold prices are here to stay and that the impact of COMEX ‘paper’ gold prices has almost been removed as the significance of New York’s gold prices has diminished, in favour of the global gold price. This is a significant point in the evolution of the gold price!

Silver Today –Silver closed at $16.94 yesterday after $16.71 at New York’s close Tuesday.

LBMA price setting:  The LBMA gold price was set this morning  at $1,285.90 from yesterday’s $1,270.15.  The gold price in the euro was set again at €1,098.78 after yesterday’s €1,084.67.

Just before the opening of New York the gold price was trading at $1,286.50 and in the euro at €1,098.54. At the same time, the silver price was trading at $17.10. 

Price Drivers

The dollar appears to have turned down to resume its fall to lower levels. It has bounced down off overhead resistance. This is now reflected in the exchange rate against the dollar as well as the gold price. Take a look at the gold price in the euro and it shows that gold is €10 higher at the opening, so the gold price is rising against all currencies now.

It was after the Fed Minutes came out that the dollar changed direction. Market hopes that tightening is still on the cards were disappointed.  As we write the dollar is trying to strengthen, but the index remains below 94.

Gold ETFs – Yesterday there were purchases of 4.435 tonnes of gold into the SPDR gold ETF but no change in the Gold Trust yesterday. The SPDR gold ETF and Gold Trust holdings are at 795.443 tonnes and at 213.28 tonnes respectively.

It does appear that U.S. investors are listening to their peers who are recommending gold to the extent of 10% – 15% of their portfolios as more warnings of toppy markets in U.S. equities become more apparent.

Since January 4th 2016, 171.08 tonnes of gold have been added to the SPDR gold ETF and to the Gold Trust. 

Since January 6th 2017, 9.114 tonnes have been added to the gold ETFs we follow.

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

Gold destined to be money

Gold Was Chemically Destined to Be Money All Along

By Frank Holmes – CEO and Chief Investment Officer, U.S Global Investors

By

I think most of you reading this right now are aware that gold is unlike any other metal, certainly any other element. It doesn’t play by the same rules as iron or tin or aluminum, and its value has nothing to do with its utility—or lack thereof. People valued the yellow metal for its beauty and malleability eons before they knew of its usefulness in conducting electricity or its chemical inertness.

That gold is so chemically “boring,” though, is one of the main reasons why it’s so highly valued, even today.

This is the conclusion of Andrea Sella, distinguished professor of chemistry at University College London. In 2013, Sella spoke with Justin Rowlatt of the BBC World Service, walking him through all 118 elements of the periodic table.

Gold, according to Sella, is the best possible candidate for a currency of any value.

As he points out, we can automatically eliminate whole swaths of the periodic table for various reasons. We can cross out gases, halogens and liquids such as helium, fluorine and mercury. No one wants to carry around vials of a colorless gas or, in the case of mercury and bromine, a poisonous substance.

We can then rule out alkaline earth metals such as magnesium and barium for being too reactive and explosive. Carcinogenic, radioactive elements such as uranium and plutonium are too impractical, as are synthetic elements that exist only momentarily in lab experiments—seaborgium and einsteinium, for example.

That leaves us with the 49 transition and post-transition metals: titanium, nickel, tin, lead, aluminum and more.

But many of these pose problems that should immediately exclude them from consideration as a currency. Most are too hard to smelt (titanium), too flimsy for coinage (aluminum), too corrosive (copper) and/or too plentiful (iron).

We are now left with just eight candidates, the noble metals: platinum, palladium, rhodium, iridium, osmium, ruthenium, silver and gold. These are all attractive as currencies, but except for silver and gold, they’re simply too rare.

So: silver and gold.

What gives gold the edge over silver, however, is—once again—its chemical inertness. Unlike its white cousin, gold doesn’t tarnish. It’s nonreactive to air and water. Add to this its softness, and it easily emerges as the perfect currency. Ancient peoples recognized this, and I don’t think anyone now would have any problem coming to the same conclusion either.

gold coins

“I view gold as the primary global currency.”

Those are the words of former Fed Chairman Alan Greenspan, speaking to the World Gold Council for the 2017 winter edition of its Gold Investor publication.

“It is the only currency, along with silver, that does not require a counterparty signature. Gold, however, has always been far more valuable per ounce than silver. No one refuses gold as payment to discharge an obligation. Credit instruments and fiat currency depend on the credit worthiness of a counterparty. Gold, along with silver, is one of the only currencies that has an intrinsic value. It has always been that way. No one questions its value, and it has always been a valuable commodity, first coined in Asia Minor in 600 BC.”

Right now, for the first time in human history, world currencies are free-floating, meaning they’re not backed by anything tangible.

It’s largely because of this that world debt has been allowed to soar to astronomical highs in recent years, threatening the stability of the global economy. As we’ve seen in Zimbabwe, Venezuela and elsewhere, a nation’s currency can rapidly lose its value and become worthless. Families and individuals who didn’t have a portion of their wealth stored in a real asset such as gold lost everything.

This is why I always recommend a 10 percent weighting in gold, with 5 percent in physical gold (coins, bars and jewelry) and the other 5 percent in high-quality gold stocks, mutual funds and ETFs.

Stronger dollar still impacting dollar gold price

Gold Today –New York closed yesterday at $1,279.70. London opened at $1,270.00 today. 

Overall the dollar was stronger against global currencies, early today. Before London’s opening:

         The $: € was stronger at $1.1725 after the yesterday’s $1.1740: €1.

         The Dollar index was stronger at 93.89 after yesterday’s 93.73

         The Yen was weaker at 110.86 after yesterday’s 110.33:$1. 

         The Yuan was much weaker at 6.6926 after yesterday’s 6.6792: $1. 

         The Pound Sterling was weaker at $1.2883 after yesterday’s $1.2957: £1

Yuan Gold Fix
Trade Date     Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    8    16

     2017    8    15           

     2017    8    14

SHAU

SHAU

SHAU

/

274.93

276.93

Trading at 275.0

274.81

276.79

$ equivalent 1oz at 0.995 fineness

@   $1: 6.6926

       $1: 6.6792

       $1: 6.6691     

  /

$1,275.28

$1,286.55

Trading at $1,273.05

$1,274.73

$1,285.90

Please note that the Shanghai Fixes are for 1 gm of gold. From the Middle East 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.]

 New York closed $5.00 higher than Shanghai’s close yesterday. Then today sees Shanghai dropping the gold price once again just before London opened, which lead to London’s prices being lower for the same reason as yesterday, as the dollar continued higher, in its falling pattern.

Shanghai continues to lead the way down, but following a stronger dollar as it adjusts to dollar gold prices.

Silver Today –Silver closed at $16.71 yesterday after $17.07 at New York’s close Monday.

LBMA price setting:  The LBMA gold price was set this morning at $1,270.15 from yesterday’s $1,274.60.  The gold price in the euro was set again at €1,084.67 after yesterday’s €1,084.67.

Just before the opening of New York the gold price was trading at $1,270.00 and in the euro at €1,085.84. At the same time, the silver price was trading at $16.71. 

Price Drivers

The dollar continues to rise taking gold prices in the dollar down. You will note that the euro gold price is barely changing, showing that this is not gold’s trading pattern, simply adjustments to the gold prices as currency exchange rates change.

The Fed Minutes are due out today, which the press is saying will impact on gold. It will be a factor no doubt, but the U.S. data of late and since the last meeting has been disappointing. Indeed, it is becoming clear based on the data that inflation falling is a deep worry. We read the indications, post the FOMC meeting as indicative of no rate hike but there is a possibility that the Fed’s Balance very slow decrease may still be on the cards. However, we do not think that this is sufficient to be a negative factor on the global gold price. Yes, it may slow U.S. demand until more negative data on inflation comes out, but it will have little to any impact on global gold demand.  

India With no duties being applied to gold jewelry exported from India the opportunity to export it, eventually to reach countries like Thailand, has seen a lot of gold coins and medallions leave the country [15% of all jewelry exported is in this form]. This has been then, exported from Thailand back to India duty free because of the Trade Agreement with Thailand. The government of India has banned exports of gold of a carat level above 22 carats.

This would make it more difficult to establish the value of the gold, but we suspect the canny Indian  gold dealers would have little difficulty in maintaining this trade, with a little bit of refining brought in. And that need not be that expensive! Such is the gold trade in India.

Gold ETFs – Yesterday there were no purchases or sales into or from the SPDR gold ETF or the Gold Trust yesterday. The SPDR gold ETF and Gold Trust holdings are at 791.008 tonnes and at 213.28 tonnes respectively.

Since January 4th 2016, 166.645 tonnes of gold have been added to the SPDR gold ETF and to the Gold Trust. 

Since January 6th 2017, 4.679 tonnes have been added to the gold ETFs we follow..

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

North Korea tensions diminish: dollar rises, gold falls

Gold Today –New York closed yesterday at $1,282.00. London opened at $1,272.75 today. 

Overall the dollar was stronger against global currencies, early today. Before London’s opening:

         The $: € was stronger at $1.1740 after the yesterday’s $1.1799: €1.

         The Dollar index was stronger at 93.73 after yesterday’s 93.33

         The Yen was weaker at 110.33 after yesterday’s 109.76:$1. 

         The Yuan was weaker at 6.6792 after yesterday’s 6.6691: $1. 

         The Pound Sterling was weaker at $1.2957 after yesterday’s $1.2995: £1

Yuan Gold Fix
Trade Date     Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    8    15

     2017    8    14           

     2017    8    11

SHAU

SHAU

SHAU

/

276.93

277.06

Trading at 275.4

276.79

276.86

$ equivalent 1oz at 0.995 fineness

@   $1: 6.6792

       $1: 6.6691

       $1: 6.6672     

  /

$1,286.55

$1,287.26

Trading at $1,277.47

$1,285.90

$1,286.32

Please note that the Shanghai Fixes are for 1 gm of gold. From the Middle East 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.] 

New York closed $4.53 higher than Shanghai’s close yesterday. Then today sees Shanghai dropping the gold price just before London opened, which lead to London’s prices being lower as the dollar corrected higher, in its falling patter. Shanghai is leading the way down, but following a stronger dollar as it adjusts to dollar gold prices.

Silver Today –Silver closed at $17.07 yesterday after $17.06 at New York’s close Friday.

LBMA price setting:  The LBMA gold price was set this morning at $1,274.60 from yesterday’s $1,281.10.  The gold price in the euro was set at €1,084.67 after yesterday’s €1,085.869.

Just before the opening of New York the gold price was trading at $1,273.00 and in the euro at €1,084.65. At the same time, the silver price was trading at $16.80. 

Price Drivers

All told, this was simply a day when the gold price barely moved in the euro but fell in the dollar as the dollar corrected higher before its next downward turn.

Now we have something definitive, but we are suspicious of the statement, “Kim Jong Un, the leader of North Korea, said he would wait to see what the US does next before he decides whether or not to fire a missile towards Guam, according to state media. Today’s statement from North Korea, coming after more conciliatory tone from the US administration yesterday, has de-escalated the threat of conflict and reassure investors after a nervous few days. But how long will this last? Putting oneself in his shoes with his posture that he is the one threatened by the U.S. [which is why he is waiting for the U.S. to act], we see he may have kept his defensive posture. This does not mean he will not fire more missiles and confirm North Korea has a nuclear bomb! The question now becomes, “Will President Trump attack if the tests continue, which we expect them to?” We see therefore, at best, that the threat has been postponed for an undetermined period of time. This postpones the North Korean situation as a factor in the gold price.

Meanwhile, the gold price has fallen in dollar terms in line with the rise of the dollar. We confirm the dollar remains in a bear market, so we expect this correction to be followed by a continuation of its fall to new lows. This will drive gold higher in dollar terms.

Gold ETFs – Yesterday there were purchases of 4.139 tonnes into the SPDR gold ETF but no change in the Gold Trust yesterday. The SPDR gold ETF and Gold Trust holdings are at 791.008 tonnes and at 213.28 tonnes respectively. While these purchases were substantial, they had no effect on the gold price. They would have to be persistent or larger than this.

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

Tubthumping gold- Rewritten and reposted

Another article posted on info.sharpspixley.com yesterday – a rewritten and reposted version of one I wrote a week ago.

Those of us who remember 1990s pop music may well recall the Brit anarchic band Chumbawumba and its major hit titled Tubthumping.  Its refrain, which actually comprised most of the song was the repeated over and over – ‘I get knocked down but I get up again.  You are never going to keep me down.’ which could well be the anthem for the gold price in recent months.  (For a link to a YouTube feature of the band appearing on the David Letterman Show around 20 years ago now, complete with a probably unanticipated political add-on – ‘Free Mumia Abu Jamal’, not on the original recording – click here.)

Gold ‘knockdowns’ when gold appears to be in freefall are seeming to occur at ever increasing frequencies – indeed whenever gold seems to be making strong progress again, but as the song suggests it still manages to get up again.  The falls are steep, and the recoveries gradual, but gold does seem to get back to where it was, and then some, over time.

If these ‘knockdowns’ had happened just a couple of times one could put that down to profit taking and normal trading with data driven gold being spooked by occasional bouts of adverse news. But this keeps on occurring.  The drops and flash crashes have nearly all been very steep indeed, which does suggest some kind of external influence putting big paper transactions into play. But, what should be comforting for the gold bulls is that each time gold has been ‘knocked down’ in this manner it has subsequently ‘got up again’ mostly back to prior levels, although the overall effect may well have been to exert some kind of overall price control slowing down what we see as gold’s inevitable rise.  Rewording the refrain from Tubthumping:  ‘Gold gets knocked down, but it gets up again.  You’re never going to keep it down

The strange recent big sales out of America’s GLD, the world’s largest gold ETF, without similar sales seeming to have been made out of IAU – America’s second largest gold ETF – also look as though they may have been designed to help keep the gold price under control.  The fact that these appear to have had little impact in actually depressing gold prices, although may have well helped prevent price rises in the light of continuing strong Asian demand for physical gold, could well suggest that gold is building up strength for an upwards breakout.

As to Asian demand, the anticipated fall-off in Indian demand after the pre-GST restocking is reportedly not taking place – at least not to the extent analysts had expected – and Chinese demand appears to be holding up to, or slightly bettering, last year’s levels.  If one includes Turkey as being in Asia, there have been increasingly strong imports of gold going in to that nation.  Turkey has acted as a conduit for gold going into other Middle Eastern nations, notably Iran, but one suspects these latest increases may reflect safe haven buying by the domestic population in the light of increasingly autocratic moves by Turkish President Recep Tayyip Erdogan, and other destabilising political events in the Middle East.

The North Korean situation and war of words between Supreme Leader Kim on the one hand and President Trump on the other have also been fanning the flames of uncertainty which has been positive for gold as a safe haven investment, both in the Far East and the USA, but if the rhetoric gets toned down on both sides, as we expect it might be, then we could yet see gold slipping back again, but the ongoing underlying rise looks inevitable.  It may not happen as fast as the more bullish observers are suggesting though.

These facts, coupled with a small decrease in new mined supply, suggest that gold has the potential to again threaten the $1,300 level through the rest of what is normally a weak northern summer although there’s not much of it left to accomplish this.  The American Labor Day holiday (Sept 4th this year), which is traditionally the end of the North American summer holiday period, often seems to be a game-changing date for the gold price to move in either direction.  It will be interesting to see what is in store for us in this respect this year, but in our view the force is now with gold – to add a Star Wars analogy to the Chumbawumba refrain.  Be prepared for a steadyish rise, but still with the occasional ‘knockdown’ en route.

Gold – Rhetoric and U.S. economy calling the price

Article first posted on info.sharpspixley.com yesterday

While there is little doubt that the USA has a much larger and proven nuclear arsenal than North Korea, Kim Jong Un will know that to deploy this against the relatively small Asian nation is fraught with problems in that nuclear fallout as a result of any such attack could also have an impact on China and South Korea – the one a potentially even more dangerous adversary and the other an ally.  Whereas if North Korea were to take out say Guam with a nuclear strike, which it has threatened to do, the impact on other nations would be far less.  However we feel either scenario is unlikely, although one can’t rule out an escalation into conventional warfare..

In assessing the risk though one assumes the U.S. is also bearing in mind that North Korea has long threatened drastic military action against its many perceived adversaries, but has seldom, if ever, delivered this.  There is also no certainty that North Korea has developed small enough nuclear warheads to fit into its Intercontinental ballistic missiles (ICBMs) which it has been developing, nor if they really have the range to reach the U.S. mainland, or the accuracy of delivery to hit their targets with any precision.  Anti-missile defence systems are also likely to be deployed around potential targets by America and its regional allies, but their efficacy is also unproven.

The whole rhetoric game – from North Korean Supreme Leader Kim Jong Un on the one side and President Trump on the other – may thus be bluff on both sides, but with a U.S. President who is prone to shoot from the hip, it is still a very dangerous confrontational game.  While a conventional non-nuclear war between the two powers would be hugely costly in terms of lives (North Korea has a huge and well equipped military) – even if China was not to be drawn in on the North Korean side – it would also be enormously dangerous to the South Korean capital, Seoul, which is only 35 miles (60km) from the North Korean border and potentially within artillery range.  (North Korean capital Pyongyang is around 130 km (80 miles) from the border so would not be quite so vulnerable to artillery attack from the South).

The big question probably is whether President Trump is painting himself into a corner with the ever-expanding hostile rhetoric.  Kim Jong Un has a history of not following through on his more dire threats so may feel that Trump will also prove to be a paper tiger.  But is this a misjudgement?  The world just doesn’t know and there is a fear that the continuing provocations may just result in a shooting war.  While nuclear arms may not be deployed by either side, at least initially, were North Korea to see itself losing such a conflict, its seemingly unstable leadership might consider launching a nuclear strike and heaven knows what that would lead to.

China may also be drawn in to any military conflict as it would rather not see a potentially hostile regime on its border.  If a shooting war does start then the ultimate diplomatic solution would, assuming Kim Jong Un is actually defeated, perhaps give China control over whatever government would take the place of the current North Korean regime.

Gold supposedly thrives on uncertainty and while the hostile rhetoric between North Korea and the USA continues, the ensuing uncertainty will build.  Coupled with the U.S. economy not performing as the Fed would like, we could also see a further decline in the U.S. dollar which should, de facto, give a boost to the dollar price of gold, which could thus be seen to appreciate strongly in dollar terms as 2017 progresses, even if the gains are not mirrored in other key currencies.

At the moment the gold price seems to be hovering uncomfortably in the $1,280s.  Some seem to be trying to knock it back – U.S. trading on Friday for example saw the gold price pulled back sharply from a couple of brief forays into the $1,290s, but whether this was profit taking, or a case of once again the powers-that-be not wishing to see the psychological $1,300 level breached, remains to be seen.  Morning trade in Europe today has seen the yellow metal move a little weaker in price, but this week could be make-or-break in terms of a move into the $1,300s.  There are still a couple of weeks of the northern hemisphere holiday season yet to run when trading can be thin, although that hasn’t been the case in the past week, but we will probably have to wait until post U.S. Labor Day (Sept 4th) for any real trend to develop.

What will happen then will be very much dependent on the escalation, or de-escalation of the U.S.-North Korean militaristic rhetoric and on U.S. economic data, which has recently been gold supportive in showing weakness in the purported U.S. economic recovery, thus reducing the Fed’s interest rate raising options

Over the longer term, this observer remains on the side of the gold bulls.  Asian demand, which is soaking up virtually all the physical gold which is available, will continue to grow as the overall wealth trend in the region remains positive; New mined supply will remain flat, or trend downwards, albeit perhaps only marginally.  Should U.S. safe haven demand return – more likely the longer the Trump-Kim war of threats continues – then we could see a serious squeeze in physical gold availability and the diminution of the ability of paper gold transactions – real or spoofed – to control the price.  Interesting times!

Hot bull market in metals developing?

Is this the start of a hot new metals bull market?

By Frank Holmes – CEO and Chief Investment Officer, U.S. Global Investors

Aluminum metals

Major U.S. indices slid for a second straight week as President Donald Trump and North Korea both escalated their saber-rattling, with Kim Jong-un explicitly targeting Guam, home to a number of American military bases, and Trump tweeting Friday that “Military solutions are now fully in place, locked and loaded.” The S&P 500 Index fell 1.5 percent on Thursday, its largest one-day decline since May. Military stocks, however, were up, led by Raytheon, Lockheed Martin and Northrop Grumman.

As expected, the Fear Trade boosted gold on safe haven demand. The yellow metal finished the week just under $1,300, a level we haven’t seen since November 2016. Last week, Ray Dalio, founder of Bridgewater Associates, the largest hedge fund in the world, said it was time for investors to put between 5 and 10 percent of their portfolio in gold as a precaution against global and domestic geopolitical risks. The threat of nuclear war is at the top of everyone’s mind, but Dalio reminds us that our indecisive Congress could very well fail to agree on raising the debt ceiling next month, meaning a “good” government shutdown, as Trump once put it, would follow.

Dalio’s not the only one recommending gold right now. Speaking to CNBC last week, commodities expert Dennis Gartman, editor and publisher of the widely-read Gartman Letter, said that he believed “gold is about to break out on the upside strongly” in response to geopolitical risks and inflationary pressures. Gartman thinks investors should have between 10 and 15 percent of their portfolio in gold.

Government shutdowns haven’t always been harmful to the stock market—during the last one, in October 2013, stocks actually gained about 3 percent—but I agree that it might be prudent right now for investors to de-risk and ensure their portfolios include safe haven assets such as gold and municipal bonds. Dalio and Gartman’s allocation percentages mirror my own. For years, I’ve recommended a 10 percent weighting in gold, with 5 percent in bullion and 5 percent in high-quality gold stocks, mutual funds and ETFs.

Analysts Bullish on Metals and Commodities

Weaker US Dollar helped commodities beat the market in july

click to enlarge

Like stocks, the U.S. dollar continued its slide last week. This has lent support not just to gold but also commodities, specifically industrial metals. The Bloomberg Commodity Index actually beat the market in July, the first time it’s done so this year.

If we look at the index’s constituents, we find that six metals—aluminum, copper, zinc, gold, silver and nickel—have been the top drivers of performance this year, thanks to a weaker dollar, China’s commitment to rein in oversupply and heightened demand. According to Bloomberg, an index of these six raw metals has jumped to its highest in more than two years.

Some market observers believe this is only the beginning. Guy Wolf, an analyst with Marex Spectron Group, told Bloomberg that he doesn’t “see anything” to make him doubt the firm’s belief that metals “are now in a bull market.”

“As people start to realize that the reasons for prices going up are robust and sustainable, that’s going to bring more money into the market,” Wolf added.

This bullish sentiment is shared by Mike McGlone, senior commodities analyst with Bloomberg Intelligence, who writes that commodities’ strong performance in July  “could be the beginning of a trend.”

“Supported by demand exceeding supply, on the back of multiple years of declining prices, a peaking dollar should mark an inflection point for sustained commodity recovery,” McGlone says.

I can’t say whether we might eventually see the highs of the commodities supercycle in the 2000s, but this news is certainly constructive.

Aluminum Liftoff

The top performer right now is aluminum, up more than 20 percent year-to-date. Last week it breached $2,000 a tonne for the first time since December 2014 and is currently trading strongly above its 50-day and 200-day moving averages.

US ISM non-manufacturing PMI sinks to 11 month low in july
click to enlarge

Demand for aluminum is growing in the automotive and packaging industries, its two key markets. With consumers and governments demanding better fuel efficiency, automakers are increasingly turning to aluminum, which is around 40 percent lighter than steel. According to Ducker Worldwide, a market research firm, the amount of aluminum used to build each new vehicle will double between the early 2010s and 2025, eventually reaching 500 pounds. That’s up from only 100 pounds per vehicle, which was the case in the 1970s. Airline manufacturers such as Boeing and Airbus are also expected to increase demand for the lightweight metal.

Supply-side conditions are also improving. Prices have struggled in recent years as China—which accounts for roughly 40 percent of world output—flooded the market with cheap, and often illegal, metal. Recently, however, the Asian giant has called for dramatic capacity cuts in a number of provinces. By the end of 2017, an estimated 4 million metric tons of capacity will have closed, or one-tenth of the country’s total annual output, according to MetalMiner.

Also supporting prices is the Commerce Department’s decision last week to slap duties on aluminum coming into the U.S. from a number of Chinese producers that were found to be heavily subsidized by the Chinese government.

The Virginia-based Aluminum Association applauded the decision, saying that its members “are very pleased with the Commerce Department’s finding and we greatly appreciate Secretary [Wilbur] Ross’s leadership in enforcing U.S. trade laws to combat unfair practices.”

The aluminum industry, the trade group says, supports more than 20,000 American jobs, both directly and indirectly, and accounts for $6.8 billion in economic activity.

Miners Getting Back to Work

There’s perhaps no greater signal of a shift in sentiment than an increase in mining activity as producers take advantage of higher prices. Bloomberg reported last week that the number of new holes drilled around the globe has accelerated for five straight quarters as of June. What’s more, drilling activity so far this quarter, as of August 7, suggests that number could extend to six quarters.

US ISM non-manufacturing PMI sinks to 11 month low in july
click to enlarge

I believe activity will only continue to expand as China pursues further large infrastructure projects, which will require even more raw materials such as aluminum, copper, zinc and other base metals. And I still have confidence that Trump and Congress can deliver on a grand infrastructure deal—the president has been turning up the heat on Senate Majority Leader Mitch McConnell, writing on Twitter that the Kentucky senator needs to “get back to work” and put “a great Infrastructure Bill on my desk for signing.”

With government spending on infrastructure falling to a record low of 1.4 percent of GDP in the second quarter, such a bill would help modernize our nation’s roads, bridges, waterways and more. It would also serve as a huge bipartisan win for Trump, which he sorely needs to build up his political capital.

But beyond that, a $1 trillion infrastructure deal would greatly boost demand for metals and other raw materials, perhaps ushering in a new commodities supercycle.

Gold traders attacking triple top

Gold Today –New York closed Friday at $1,294.00. London opened at $1,282.75 today. 

Overall the dollar was weaker against global currencies, early today. Before London’s opening:

         The $: € was weaker at $1.1799 after the Friday’s $1.1754: €1.

         The Dollar index was weaker at 93.33 after Friday’s 93.47

         The Yen was weaker at 109.76 after Friday’s 109.09:$1. 

         The Yuan was weaker at 6.6691 after Friday’s 6.6672: $1. 

         The Pound Sterling was slightly stronger at $1.2995 after Friday’s $1.2975: £1

Yuan Gold Fix
Trade Date     Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    8    12

     2017    8    11           

     2017    8    10

SHAU

SHAU

SHAU

/

277.06

274.85

Trading at 277.25

276.86

275.77

$ equivalent 1oz at 0.995 fineness

@   $1: 6.6691

       $1: 6.6672

       $1: 6.6594     

  /

$1,287.26

$1,270.07

Trading at $1,287.77

$1,286.32

$1,269.70

Please note that the Shanghai Fixes are for 1 gm of gold. From the Middle East 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.]

 New York closed $7.00 higher than Shanghai’s close yesterday. Then today sees Shanghai lifting the gold price again. But London pulled it down $6 lower. London and Shanghai see the gold price differently with London being more volatile that Shanghai as you can see above. Shanghai still needs to take gold above $1,300 for the gold price to run higher.

As we said on Friday, “Today and next week become important days for the gold price. It is also the time when North Korea said they would fire a missile towards Guam!”

Silver Today –Silver closed at $17.07 yesterday after $17.06 at New York’s close Wednesday.

LBMA price setting:  The LBMA gold price was set today at $1,281.10 from yesterday’s $1,288.30.  The gold price in the euro was set at €1,085.86 after yesterday’s €1,095.59.

Just before the opening of New York the gold price was trading at $1,282.60 and in the euro at €1,087.23. At the same time, the silver price was trading at $17.02. 

Price Drivers

We are amazed today to find that, fears of war with North Korea are almost off the table and markets are calmed because of it. We looked round to see if these assumptions were due to the North Korean President saying something along the lines that he will not fire the missile towards Guam? No, he hasn’t said anything! Did President Trump say anything? No! But U.S. officials said nuclear war is not a danger. It’s time for a reality check we think and ask, which ‘Officials” are in a position to counter both Presidents?  Hence we do not see the market calmness as a result of these official’s statements. We see the market calmness simply calm after the dramas of last week that could easily change back to heightened fears in a heartbeat.  But also as we said last week, we do not accept that gold rose on war fears, it was because of the dollar’s ongoing weakness and Asian demand.

But if a missile is fired by North Korea towards Guam then the whole set of global financial markets changes. Gold will certainly rise on war fears then.

But the failure of inflation to rise, alongside disappointing wage pressures is assisting gold’s rise outside of China, where demand is proving a constant. Now add to that a toppy equity market in the U.S. and we could see moves out of equities into gold as well. These elements are not quickly passing features of the financial world. It is on these that the gold price is rising. All this is happening ahead of the start of the ‘Gold Season’ which starts in a couple of weeks from now!

We see the gold price pulling back today because traders are attacking the ‘triple top’ that is in the Technical picture. The week could prove volatile!

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

Posts on Sharps Pixley: Tubthumping gold and; Chinese Gold Reserves: Playing the old game

I posted the two articles following on the Sharps Pixley website yesterday and are reproduced here in a lightly edited form:

Tubthumping gold

Those of us who remember 1990s pop music may well recall the Brit anarchic rock band Chumbawumba whose one major hit was called Tubthumping.  Its refrain, which actually comprised most of the song was the repeated over and over – ‘I get knocked down but I get up again.  You are never going to keep me down.’ which could well be the anthem for the gold price in recent months.

A gold ‘knockdown’ happened again yesterday (*th August) when gold appeared to be in freefall once more just after the New York market opened, but the extremely sharp drop, which took it down over $10, in a matter of minutes, managed to reverse itself yet again and the yellow metal managed to end the day just about where it had started – at a little over $1,260 and so far today (9th August) has moved upwards further – to close to $1,270 at the time of writing, although some of this overnight increase will have been due to increased geopolitical tensions involving North Korea.  Since then it has risen to breach $1,280 although this could be reversed once New York opens.

If these ‘knockdowns’ had happened just the once one could put that down to normal trading with data driven gold being spooked by occasional bouts of adverse news. But this keeps on occurring.  The drops and flash crashes have nearly all been very steep indeed, which does suggest some kind of external influence putting big paper transactions into play. But each time gold has made a recovery mostly back to prior levels, although the overall effect of the knockdowns may well have been to exert a kind of price control.

The strange recent big sales out of America’s GLD, the world’s largest gold ETF, when no similar sales seem to have been made out of IAU – America’s second largest gold ETF – also look as though they may have been designed to keep the gold price under control.  The fact that these appear to have had little impact in actually depressing gold prices, but may have well helped prevent price rises in the light of continuing strong Asian demand for physical gold, could well suggest that gold is building up strength for an upwards breakout.

The anticipated fall-off in Indian demand after the pre-GST restocking is reportedly not taking place – at least not to the extent analysts had expected – and Chinese demand appears to be holding up to, or slightly bettering, last year’s levels.  These facts, coupled with a small decrease in new mined supply, suggest the portents gold has the potential to again threaten the $1,300 level through the rest of what is normally a weak northern summer.  The American Labor Day holiday (Sept 4th this year), which is traditionally the end of the North American summer holiday period, often seems to be a game-changing date for the gold price.  It will be interesting to see what is in store for us in this respect this year.

For those interested here’s a link to youtube of Chumbawumba’s appearance on the David Letterman show: Chumbawamba – Tubthumping (Live at David Letterman Late Show)

Chinese gold reserves: Playing the old game

According to its reporting to the IMF, China has now not officially added to its gold reserves for nine months in a row.  Indeed these gold reserves have remained static, as far as official disclosures go, ever since the yuan (renminbi) was admitted as a constituent of the IMF’s Special Drawing Right in October last year.  Prior to that the country had been reporting monthly increases to its gold reserves from July 2015, apparently in the interests of transparency – but before that had only reported increases at five or six year intervals in the meantime keeping up the pretense of not adding to its reserves at all on a month-by-month basis.  It definitely looks as though, now that the yuan is a constituent part of the SDR any suggestion of even limited transparency in China’s gold reserve building process has again fallen by the wayside.  Secrecy reigns.

China achieves this by holding gold in accounts it says it does not need to report to the IMF rather than within its official Forex Reserve figures.  Given the nation’s often-stated affinity to gold’s role in any global financial restructuring which may lie ahead it indeed seems highly unlikely that the country is not again surreptitiously adding to its gold reserves.  Indeed it poses the question as to whether what it has been reporting as its total reserve figure is in reality in any way representative of what it truly holds in gold in terms of its total gold reserve.  Mind you this policy could well apply to other nations too as most national gold holdings are not audited on any kind of consistent basis.  The IMF relies totally on what its constituent nations tell it – it does not check their accuracy.

Many believe that China’s ultimate aim is to hold more gold than the USA does – officially reported at 8,133.6 tonnes.  China’s current reported total gold holding is 1,842.6 tonnes, but few believe that this is the true total with estimates out there of a realistic total of 4,000 tonnes or even higher.  If the 4,000 tonne estimate is correct then that would put China in second place among national holders of gold – more than Germany, currently in second place, which reports some 3,374 tonnes (For the latest reported world gold holdings click on WORLD OFFICIAL GOLD HOLDINGS).

For example – re. Chinese holdings, a recent note on that country’s www.globaltimes.cn website stated: ‘Although the People’s Bank of China (PBC), the country’s central bank, has not publicly disclosed plans to increase gold reserves since October 2016, some market analysts, based on calculations on domestic gold output and imports in recent years, estimated that the country’s above-ground gold reserves totaled 20,193 tons as of June, according to a report published by domestic industry website cnfol.com over the weekend.  While about 16,193 tons of gold are owned by Chinese citizens, the remaining 4,000 tons are held by the country’s central bank, said the report.’

While such figures are only analysts’ estimates, it does indeed seem likely that the nation’s gold reserves are higher than officially stated – almost certainly substantially so, but whether they are double the current figure , or several times this, remains conjecture until China comes clean with an  accurate figure.

There has been the suggestion that China is not announcing its true gold reserve figure, nor any monthly build-up, with a view towards not boosting the gold price, which might rise substantially if it were to do so, in order for it to keep on buying at what it sees as relatively low prices in an ongoing process of reducing the US dollar component of its forex holdings.

It may also, though, have an interest in not knocking the gold price back due to the reported holdings by Chinese citizens (see above) – it may well thus have an agenda to control the price on their behalf, but without letting it rise uncontrollably for the time being – but also not allowing it to fall back – as it continues to work towards a build-up in domestic demand as its main economic driver, rather than continue to rely on exports to keep the wheels of its manufacturing sector turning.

As a fully state-controlled economy, and as the world’s biggest known producer and importer of physical gold China does have the power to control the gold price if it so wishes to.  If it sees a potential domestic benefit in allowing the price to rise and thus boost the wealth and the spending power of its gold-holding citizens it is well capable of doing so.  Yet another possible factor in the gold price manipulation theories that abound.

Gold back over $1280; Silver over $17; U.S. recovery fragile and vulnerable

Gold Today –New York closed yesterday at $1,279.30. London opened at $1,278.00 today. 

Overall the dollar was stronger against global currencies, early today. Before London’s opening:

–         The $: € was stronger at $1.1732 after the yesterday’s $1.1760: €1.

–         The Dollar index was stronger at 93.70 after yesterday’s 93.61.

–         The Yen was weaker at 109.98 after yesterday’s 109.75:$1.

–         The Yuan was much stronger at 6.6594 after yesterday’s 6.6782: $1.

–         The Pound Sterling was weaker at $1.2980 after yesterday’s $1.3005: £1

Yuan Gold Fix
Trade Date     Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    8    10

     2017    8    9           

     2017    8    8

SHAU

SHAU

SHAU

/

273.77

273.21

Trading at 275.75

273.69

272.70

$ equivalent 1oz at 0.995 fineness

@   $1: 6.6594

       $1: 6.6782

       $1: 6.7059     

  /$1,270.07

$1,262.21

Trading at $1,282.92$1,269.70

$1,259.84

Please note that the Shanghai Fixes are for 1 gm of gold. From the Middle East 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.]

 New York closed just under $10.00 higher than Shanghai’s close yesterday. Then today sees Shanghai lifting the gold price even higher as you can see. London is still lagging but not by much as it opened

We were looking to see if this was a jump on the back of the deteriorating situation with North Korea. We would have thought that if this were so, the gold price would have jumped higher. So far the evidence is not there.

London is $5 lower than Shanghai, but raced to catch up and at one point in London was the same as Shanghai’s earlier trading levels.

Silver Today –Silver closed at $16.86 yesterday after $16.38 at New York’s close Tuesday.

LBMA price setting:  The LBMA gold price was set this morning at $1,278.90 from yesterday’s $1,267.95.  The gold price in the euro was set at €1,091.03 after yesterday’s €1,080.30.

Just before the opening of New York the gold price was trading at $1,280.60 and in the euro at €1,092.38. At the same time, the silver price was trading at $17.10. 

Price Drivers

The gold price in dollars is now at $1,280, so the answer to yesterday’s question, “Will it run higher in the $1,270s?” was given in a day! So, where next?

The Yuan continues to strengthen strongly against the dollar, which itself is strengthening against other currencies.

The Fed

Members of the FOMC are talking to the media in very dovish manners. The evidence that inflation is falling has clearly disturbed them. After the 2015, 2016 steady building of inflation, it is falling back again. This implies that we may well not see another rate hike in 2017. They still feel that a start to the Fed’s Balance Sheet tightening will be made. After all, it will be slight and the Fed believes it will have barely any impact on markets.

While academically that may be true, psychologically it may be a mistake. The recovery remains vulnerable and fragile. Any hint of tightening may well cause a market reaction when they broach that subject with action. Meanwhile, the earnings picture is pointing to it peaking in the near term, if it has not already done so. This makes equity markets toppy. They could turn mercurial if evidence arrives that tightening, even slightly, is about to happen.

Gold will benefit from any stalling of Fed tightening. Real interest rates continue to be negative but if inflation falls back further until rates are not negative, we fully expect the Fed to turn back to the easing path.

North Korea

It is apparent that North Koreans are being fed propaganda that the U.S. is its main enemy and about to invade the country. This distracts from the dire economic state of the country. President Trump is reinforcing that idea with his responses. His words would, in the North Koreans eyes, justify continuing on the threatening war path. The President of the country is seen as a psychopath and intent on going ahead with his threats.

China, on the other hand, will not allow that buffer state to be destroyed, bringing the U.S., militarily dominated South Korea to its doorstep. This formula will lead to conflict, we now believe. But the markets have not yet responded to this potential. Gold has not jumped as it would have done if markets were reacting. The rise overnight in the gold price in the U.S. was not via physical buying but a dealer’s response to the North Korean situation. On the other hand the rise in Shanghai prices would be based on physical dealings. A $10 rise in Shanghai falls far short of a ‘war fear’ rise.

As we said yesterday, “Gold will benefit if war does break out as the war hurts financial markets the whole world over.”

Gold ETFs – Yesterday there were no changes in the holdings of the SPDR gold ETF or the Gold Trust holdings yesterday. The SPDR gold ETF and Gold Trust holdings are at 786.869 tonnes and at 211.43 tonnes respectively.

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

Market morning – Gold and the North Korean crisis

Gold Today –New York closed yesterday at $1,262.60. London opened at $1,265.00 today. 

Overall the dollar was stronger against global currencies, early today. Before London’s opening:

         The $: € was stronger at $1.1760 after the yesterday’s $1.1804: €1.

         The Dollar index was stronger at 93.61 after yesterday’s 93.36

         The Yen was stronger at 109.75 after yesterday’s 110.58:$1. 

         The Yuan was much stronger at 6.6782 after yesterday’s 6.7059: $1. 

         The Pound Sterling was weaker at $1.3005 after yesterday’s $1.3035: £1

Yuan Gold Fix
Trade Date     Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    8    9

     2017    8    8           

     2017    8    7

SHAU

SHAU

SHAU

/

273.21

273.36

Trading at 274.20

272.70

273.31

$ equivalent 1oz at 0.995 fineness

@   $1: 6.6782

       $1: 6.7059

       $1: 6.7190     

  /

$1,262.21

$1,260.43

Trading at $1,272.08

$1,259.84

$1,260.20

Please note that the Shanghai Fixes are for 1 gm of gold. From the Middle East 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.]

 New York closed $2.80 higher than Shanghai’s close yesterday. Today, we are seeing the dollar stronger overall but the Yuan is quite a bit stronger against the dollar. London is $7 lower than Shanghai.

Shanghai is on the front foot today and likely to pull London and New York higher today.

Silver Today –Silver closed at $16.38 yesterday after $16.25 at New York’s close Monday.

LBMA price setting:  The LBMA gold price was set this morning at $1,267.95 from yesterday’s $1,261.45.  The gold price in the euro was set at €1,080.30 after yesterday’s €1,067.85.

Just before the opening of New York the gold price was trading at $1,270.45 and in the euro at €1,082.43. At the same time, the silver price was trading at $16.71. 

Price Drivers

The gold price in dollars is now at $1,270. Will it run higher in the $1,270’? If so that would be very positive for future rises. Or will it be turned back again?

The currency markets are in a correction phase with the dollar rising but not against the Yuan or Yen. The gold price is higher in the euro but mainly as a result of the stronger dollar. This is why it rose more in the than in the dollar.

North Korea

We were around when the Cuban Missile Crisis brought the world to the brink of World War 3. Today this is one country, North Korea, against the U.S. to begin with. But in 1952 when the Korean War raged it became China plus North Korea that took on the Allies. We see a potential restart to the war again [which never officially ended] and a major deterioration of U.S. – China relations if it does. China will not accept the elimination of North Korea!

At the moment the markets are not discounting this likelihood. We may see China and Japan do so soon. In South Korea the atmosphere is moving towards fear quickly.

Gold will benefit if war does break out as the war hurts financial markets the whole world over.

U.S. credit levels are up as high as they were before the 2008 crisis. While it is widely believed that the developed world banking system is repaired and capable of withstanding another financial crisis any financial accident that strikes now will have a devastating impact, more so than in  2008.

Gold ETFs – Yesterday there were no changes in the holdings of the SPDR gold ETF or the Gold Trust holdings yesterday. The SPDR gold ETF and Gold Trust holdings are at 786.869 tonnes and at 211.43 tonnes respectively.

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

Gold and Silver weaker, dollar stronger, on U.S. jobs report

Gold Today –New York closed Friday at $1,264.40. London opened today at $1,258.40. 

Overall the dollar was stronger against global currencies, early today. Before London’s opening:

         The $: € was stronger at $1.1802 after the Friday’s $1.1881: €1.

         The Dollar index was stronger at 93.38 after Friday’s 92.74

         The Yen was weaker at 110.81 after Friday’s 110.026:$1. 

         The Yuan was stronger at 6.7190 after Friday’s 6.7200: $1. 

         The Pound Sterling was weaker at $1.3050 after Friday’s $1.3149: £1

Yuan Gold Fix
Trade Date     Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    8    7

     2017    7    4           

     2017    7    3

SHAU

SHAU

SHAU

/

274.98

274.52

Trading at 273.75

275.49

274.22

$ equivalent 1oz at 0.995 fineness

@   $1: 6.7190

       $1: 6.7237

       $1: 6.7253     

  /

$1,266.35

$1,264.91

Trading at $1,262.24

$1,269.40

$1,263.53

Please note that the Shanghai Fixes are for 1 gm of gold. From the Middle East 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.]

 New York closed $2 lower than Shanghai’s close Friday. But today, we are seeing a stronger dollar, and a lower dollar gold price in London. The jobs report was met with enthusiasm that turned the dollar higher for now. Even with a stronger dollar we are seeing a stronger Yuan. London opened $3.85 lower than Shanghai but Shanghai was trading at only $2 lower than New York’s Friday close.

Silver Today –Silver closed at $16.25 Friday after $16.63 at New York’s close Thursday.

LBMA price setting:  The LBMA gold price was set this morning at $1,257.55 from Friday’s $1,269.30.  The gold price in the euro was set at €1,065.90 after Friday’s €1,068.34.

Just before the opening of New York the gold price was trading at $1,258.20 and in the euro at €1,065.73. At the same time, the silver price was trading at $16.21. 

Price Drivers

The jobs report was read by the market in a positive light. It turned the dollar stronger against all currencies and pulled the gold price down in dollar terms. We expected a rise in  the gold price because we expected higher employment and felt the market would only react to wage inflation, which, in line with our views, was barely noticeable. But the market looked only at the jobs numbers.

In the euro there was only a small drop in the gold price. So where is the dollar going from now on? We don’t see the gold price falling in other currencies and indeed we are not convinced by the jobs report spurring wage inflation soon. The jobs being created are easily low, but on top of that the impact of technology on quality jobs is heavy. The failure of full employment to spur wages is a structural change that will not reverse.

In the Gold Forecaster we have outlined that in the developed world up to 50% of all jobs will be permanently lost to A.I. and machines. This fact has not been accepted in general, by economists. Until, not just the problem but new-industry, job creation is put into effect it is unlikely that wage inflation will take off. In turn, that slows the recovery and makes it vulnerable. Likewise, for fixed interest markets! The current equity, fixed interest rate levels are becoming more vulnerable by the day.

So we don’t move away from a weak dollar. We see the current rise as being short lived before the dollar resumes its fall.  This translates into gold holding current levels in currencies other than the dollar, then rising in the dollar once more. It will see a good boost in the Autumn when the gold ‘season’ kicks off.

Gold ETFs – 

There were sales from the SPDR gold ETF (GLD) of 4.731 tonnes but no change in the Gold Trust (IAU) holdings on Friday. The SPDR gold ETF and Gold Trust holdings are at 787.144 tonnes and at 211.43 tonnes respectively.

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

Be pepared for Historic Gold and Silver Run

By David Smith* –  Money Metals News Service

The Bigger the Base, the Greater the Upside Case. This saying among technical analysts/chartists helps define where we are today in the precious metals – and where we’ll soon be headed.

It means that when prices “base” in a relatively narrow sideways range for an extended period, they will at some point break out. Before the action gets underway, bears and bulls alike will get “sandpapered” as they take positions, trying to guess whether or not the price is getting ready to decline further or move upward into a new bull phase.

If you consider that time spent in sideways consolidation represents a build-up in stored energy, then a valid upside breakout will be propelled by a lot of buying fuel as old shorts who bet on lower prices offset their losing positions and new longs jump in to get onboard the change in trend.

2017 Feb. Silver - Continuous Contract

Chart by Gary Savage, Editor, Smart Money Tracker.

 

This frustrating sideways movement is not taking place in a vacuum.

Bankster manipulation, algo-trading, “fat finger” futures markets’ whip-saw behavior, and price chasing in both directions becomes a regular feature of the trading landscape. A long time goes by with neither side having enough trading power to break out of congestion.

This takes place concomitant with the central banks’ war on cash, currency and trade manipulation, and geo-political brushfires stacking up around the globe. Ongoing strife in Syria, possible war with North Korea and flash points in the South China sea may be classed as severe “low-probability events, but as Jim Rickards says, when taken in total, it becomes highly probable that at least one of them will ignite a crisis, possibly starting a chain-reaction with the others.

At some point prices jump the rails, catching most by surprise. By the time the picture clears and Mr. Market decides to provide us with some answers, it’s usually too late to climb aboard.

Gold Chart - Red Line in the Sand

$1300 Gold’s “red line in the sand”
Courtesy Nick Laird

 

Given the powerful seven-month rally during the first half of 2016 notwithstanding (followed by a more than 50% give-back over the past year), a lot of gold and silver bugs can be forgiven for coming to believe that they will never see a meaningful, sustained resumption of the exciting days of 2005-6, 2009-11 and early 2016.

The feeling of being either “worn out or scared out” – as David Morgan likes to characterize the patience-testing during an extended cyclical bear market wave – has caused more than a few people to sell back their insurance and investment positions in the metals. I believe this is a decision that – sooner rather than later – they will come to seriously regret.

Make no mistake. The government is not here to help you.

Steward Dougherty, in the essay, Currecide: The Globalists’ Planned Annihilation of Your Savings and Freedom states:

Its (gold) going ballistic, is probably better set-up right now than at any other time in history, for a large number of reasons… I continue to think that cash elimination is the biggest story out there. It is a fraud of epic proportions, and its implications are dark and deeply disturbing… Sometimes, you have to say something five times before people say, “Wow. This is important. I better do something about it.” If people decide to “do something about it,” they are going to find that their options are limited. Gold being one of the few of them.

Gold demand would go nuts if only the people could finally understand why they need to buy it right now… I think the dam of realization is coming very close to breaking, and that there could be an outright flood of new, popular awareness and action (my underline).

A Greek financial golden age? Looking at the pathetic financial state of Greece today, it’s hard to imagine that there was ever a time when financial acumen was a trait of which they could be proud. Does the following sound even remotely like what we’ve got going on now – just about anywhere around the globe?

When the Athenian treasury was audited in 440 B.C., it showed a surplus of over 9700 talents – a common unit of measurement for gold and silver during those times. Using current precious metals’ values, aligned with the 14:1 silver/gold ratio favored by the ancient Greeks, those 9700 talents would be the equivalent today of around $700 million!

Says Simon Black, writing in Sovereign Man, “At the time, Athens boasted a population of around 43,000 citizens and 28,500 foreign residents… so on a ‘per capita’ basis, the ancient Athenian surplus amounted to just under $10,000 per person in today’s money. If you compare this figure to our modern world, it’s pretty extraordinary.”

Of the 5 classifications of estimated metals’ holdings for a given project or property tallied for a formal NI-43 101 Report, the most reliable are found in the “Reserve” category, the subsets of which are “Proven” and “Probable”. Everything else being equal, these two listings show what management believes – backed by a variety of exploration methods – have the highest probability of being economically feasible.

Average Number of Years Between Discovery and Production

Source: SNL Metals & Mining, U.S. Global Investors, IAMGOLD.

Discoveries, reserves, and grades (grams/tonne) are in steady decline.

For well over a decade, the grade (grams/tonne) of gold produced has been steadily declining. Since 2013 listed reserves, as well as absolute production itself looks to have peaked. And now it’s taking years longer just to bring a new discovery into operation. Toss increasing demand into the mix, and the math points in only one direction – higher prices.

It’s not easy to buy metals when they’re trading sideways to down.

It’s taken a lot longer for us to reach “the promised land” of sustainably higher gold and silver prices than most anticipated. Yes, the herd is throwing money at the DOW and the S&P, assuming they will grow indefinitely to the sky. Yes, with all these things considered, it’s difficult to start or continue accumulating precious metals. And the charts have only recently begun to suggest a change. But…

When things look this way and you feel like going with the herd and maybe stepping in what it leaves behind, recall once again Rick Rule’s famous (and profitable) investment cautionary, “You can either be a contrarian… or road kill.” Could his “investing rule” make your decision to “keep on stackin'” a bit easier?

Warren Buffet has without a doubt, been one of the pre-eminent investors of the modern era. As you read the following quote, replace the term “stocks” with “precious metals.”

“To refer to a personal taste of mine, I’m going to buy hamburgers the rest of my life. When hamburgers go down in price, we sing the ‘Hallelujah Chorus’ in the Buffett household. When hamburgers go up in price, we weep. For most people, it’s the same with everything in life they will be buying – except buying stocks. When stocks go down and you can get more for your money, people don’t like them anymore.” – Fortune Magazine: “The Wit and Wisdom of Warren Buffett.”

The clock is ticking. The ducks are lining up. Are you paying attention? Do you have a plan? Are you working your plan…?

* About the Author:

Gold and silver brought down after hours

Gold Today –New York closed yesterday at $1,278.40. London opened at $1,261.40 today. 

Overall the dollar was weaker against global currencies, early today. Before London’s opening:

         The $: € was weaker at $1.1849 after the yesterday’s $1.1832: €1.

         The Dollar index was weaker at 92.92 after yesterday’s 92.99

         The Yen was stronger at 110.66 after yesterday’s 110.78:$1. 

         The Yuan was stronger at 6.7237 after yesterday’s 6.7253: $1. 

         The Pound Sterling was almost unchanged at $1.3232 after yesterday’s $1.3223: £1

Yuan Gold Fix
Trade Date     CContract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    8    3

     2017    7    2           

     2017    7    1

SHAU

SHAU

SHAU

/

275.08

275.29

Trading at 274.75

274.95

275.37

$ equivalent 1oz at 0.995 fineness

@   $1: 6.7237

       $1: 6.7253

       $1: 6.7179     

  /

$1,267.20

$1,269.58

Trading at $1,265.98

$1,266.60

$1,269.06

Please note that the Shanghai Fixes are for 1 gm of gold. From the Middle East 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.]

 New York closed at almost $14 higher than Shanghai’s yesterday’s close. In what we see as a striking testament to the power of Shanghai’s pricing dominance Shanghai moved slightly lower than its previous close with London following it at today’s open with $4.60 discount to Shanghai’s trading level today. With the gold world still looking at New York in the belief that the world will follow that market an understanding of the interrelationship of the three global gold markets is becoming paramount!

Silver Today –Silver closed at $16.73 yesterday after $16.76 at New York’s close Tuesday.

LBMA price setting:  The LBMA gold price was set today at $1,261.80 from yesterday’s $1,266.25.  The gold price in the euro was set at €1,065.35 after yesterday’s €1,070.55.

Just before the opening of New York the gold price was trading at $1,263.00 and in the euro at €1,066.50. At the same time, the silver price was trading at $16.48. 

Price Drivers

The gold price in New York yesterday ran away with itself but on no physical gold movements in the gold ETFs. COMEX was the main influence on gold prices there. In the past this would have been enough to drive physical gold prices higher, but this time it had no influence on global gold prices.  In fact, this morning we see New York badly out of line with the other two main global gold markets and expect it to be pulled down to London and Shanghai’s level today as it was in after-hours trading yesterday. This should not be translated as gold’s weakness but as evidence that COMEX is no longer the main influence on gold prices. The physical markets in gold are the determinant of gold prices going forward. This is a tremendous structural change in global gold markets. What is remarkable is that it is being ignored by commentators in the western world’s gold markets.

Currencies have played almost no role in the last day’s gold price action. However, we continue to see the dollar index gently decline.

Gold ETFs – The SPDR gold ETF holdings remain unchanged as no sales or purchases took place yesterday but in the Gold Trust sales of 0.58 of a tonne took place. The SPDR gold ETF and Gold Trust holdings are at 791.875 tonnes and at 211.43 tonnes respectively.

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

 

World Gold Council – Latest Gold Demand Trends

Here’s what the World Gold Council reckons are the key takeaways from its new Gold Demand Trends report.  As can be seen it reckons demand has slowed y-o-y but that’s entirely because of lower gold ETF demand in the first half.  When reviewing these figures, and extrapolating them for the full year, it should be borne in mind that H2 2016 gold ETF demand fell back sharply too in comparison with H1 2016.

WGC: Q2 and H1 gold demand down on slower ETF inflows

Q2 gold demand of 953.4t was 10% lower than 2016, while H1 demand slowed 14% to 2,003.8t. Y-o-y comparisons are affected by record ETF inflows in 2016: demand from this sector slowed dramatically after last year’s H1 surge. Central bank net purchases of 176.7t were also slightly lower in the first half (-3%). By contrast, bar and coin investment improved, as did jewellery demand, although the latter remains weak in a long-term context. Technology demand also made modest gains.

Slower ETF inflows drove H1 weakness

Highlights

ETF inflows slowed dramatically from last year’s record pace. But holdings continued to grow: after adding 56t in Q2, H1 inflows reached 167.9t. European ETFs saw the strongest H1 inflows: holdings in these funds reached a record 977.7t.

Bar and coin investment rebounded from very low levels.Q2 demand gained 13% from Q2 2016, while H1 demand rose 11%. A strong jump in Turkey was fuelled by economic recovery, double-digit inflation and relative currency stability.

Jewellery demand strengthened from a weak 2016, but fell short of the long-term average. India was the main contributor to the 8% gain in Q2, as it recovered from extremely low 2016 demand.

Central banks continued to buy, but at a more modest pace than in recent years. The most recent quarter saw Turkey’s central bank add to its gold reserves – the first significant purchase since the 1980s.

Technology demand registered its third consecutive quarter of growth: up 2% to 81.3t. Growth in wireless charging and development of features that use LEDs boosted demand. New smartphone handsets supported chip production.