Sales out of GLD continue but with little gold price effect

Gold Today –New York closed yesterday at $1,257.20. London opened at $1,253.00 today. 

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

         The $: € was slightly weaker at $1.1654 after yesterday’s $1.1650: €1.

         The Dollar index was slightly stronger at 93.97 after yesterday’s 93.94

         The Yen was weaker at 111.25 after yesterday’s 110.76:$1. 

         The Yuan was almost unchanged at 6.7506 after yesterday’s 6.7503: $1. 

         The Pound Sterling was slightly weaker at $1.3031 after yesterday’s $1.3041: £1.

Yuan Gold Fix
Trade Date     Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    7    25

     2017    7    24           

     2017    7    21

SHAU

SHAU

SHAU

/

274.40

272.40

Trading at 274.60

273.84

272.69

$ equivalent 1oz at 0.995 fineness

@    $1: 6.7506

       $1: 6.7503

       $1: 6.7697     

  /

$1,259.36

$1,246.55

Trading at $1,260.22

$1,256.78

$1,247.88

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 $0.50 higher than Shanghai on yesterday with London opening $7 lower than Shanghai. This keeps open arbitrage opportunities with Shanghai. Once again Shanghai is pointing the way higher for New York and London.

Sales from the SPDR gold ETF become available for shipping to Shanghai implying that should U.S. investors want to return to physical gold they will have to pay up for it.

Silver Today –Silver closed at $16.40 yesterday after $16.48 at New York’s close Friday.

LBMA price setting:  The LBMA gold price was set this morning at $1,252.00 from yesterday’s $1,255.85.  The gold price in the euro was set at €1,074.68 after yesterday’s €1.078.45.

Just after the opening of New York the gold price was trading at $1,252.65 and in the euro at €1,071.74. At the same time, the silver price was trading at $16.46. 

Price Drivers

The gold price continues to consolidate just above support at $1,250. Last time it was here it struggled to hold or move higher. It was at this level that it was attacked and knocked down. The difference this time is that dollar weakness has gained momentum and will contribute to gold’s strength. In addition Chinese demand and the new London based LMEprecious arbitrage market with Hong Kong is letting London feel Chinese demand directly, in  addition to the big banks in China doing the same in London. So we are watching to see where the gold price will go today.

As you can see below sales from the SPDR gold ETF continue unabated because of the perception that the Fed will not do anything until the end of the year so equities appear more attractive. You will note that the amount of gold acquired into U.S. gold ETFs since the beginning of the year, has dwindled to only 9 tonnes.

The Fed is deliberating that very matter tomorrow. The market expects Janet Yellen to make an announcement on tapering the Fed’s bloated Balance Sheet today. The market is sensitized to this and will react no matter what she says.

 

Gold ETFs – Yesterday saw sales of 4.14 tonnes of gold from the SPDR gold ETF but, again, no change in the Gold Trust. The SPDR gold ETF and Gold Trust holdings are at 809.619 tonnes and at 211.86 tonnes respectively.

In the last week heavy persistent gold sales from the SPDR gold ETF have had absolutely no impact on the gold price as it soared up from the bounce straight through the $1,250 “Golden Cross’”.

We expect these sales to halt this week as the gold picture looks so positive.

Since January 6th 2017 9.022 tonnes have been added to the SPDR gold ETF and the Gold Trust.

 Julian D.W. Phillips 

 GoldForecaster.com | StockBridge Management Alliance 

Gold up through resistance and consolidating

Gold Today –New York closed Friday at $1,254.30. London opened at $1,254.00 today. 

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

         The $: € was slightly stronger at $1.1650 after Friday’s $1.1657: €1.

         The Dollar index was weaker at 93.93 after Friday’s 94.09

         The Yen was stronger at 110.76 after Friday’s 111.69:$1. 

         The Yuan was stronger at 6.7503 after Friday’s 6.7697: $1. 

         The Pound Sterling was stronger at $1.3041 after Friday’s $1.3001: £1.

Yuan Gold Fix
Trade Date     Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    7    24

     2017    7    21           

     2017    7    20

SHAU

SHAU

SHAU

/

272.40

271.44

Trading at 273.90

272.69

271.36

$ equivalent 1oz at 0.995 fineness

@    $1: 6.7503

       $1: 6.7697

       $1: 6.7549     

  /

$1,246.55

$1,244.87

Trading at $1,257.05

$1,247.88

$1,244.50

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 nearly $8.00 higher than Shanghai on Friday with London opening only $3 less than Shanghai. If this persists this week with the differentials narrowing as they are, then we will have confirmation that arbitrageurs are proving successful in smoothing out the differences between the global gold markets.

This is a structural change in the global gold market and allows a considerably greater influence of the physical gold market [primarily Shanghai] to impact the gold price and diminish the impact of the ‘paper gold markets of COMEX and the ‘paper’ side of the London gold market, across the world.

We have highlighted in the Gold Forecaster newsletter of ours that while 90+% of gold-linked transactions go through London and COMEX over 90% of physical gold transactions go through Shanghai. With the impact of the arbitrageurs bringing global gold prices together, we will see, at last, the fundamentals of demand and supply impact the price.

An analogy of this is seen in the sea where the surf and waves have the loudest impact, but the current dominates the ebbing and flowing of the sea itself.  The current is now taking control whereas the surf and waves appeared to have it before.

Silver Today –Silver closed at $16.48 Friday after $16.30 at New York’s close Thursday.

LBMA price setting:  The LBMA gold price was set today at $1,255.85 from Friday’s $1,247.25.  The gold price in the euro was set at €1,078.45 after Friday’s €1.071.61.

Just after the opening of New York the gold price was trading at $1,256.50 and in the euro at €1,078.73. At the same time, the silver price was trading at $16.54. 

Price Drivers

The gold price has broken through overhead resistance and is now consolidating on that resistance which is now support. Today, we expect and are seeing a dollar rally back to overhead resistance before resuming its downward path. The media is blaming the Trump family for the fall, but as we said last week,   the dollar bear market has begun in earnest! Once this rally subsides, we do see rallies in the dollar but the trend is lower now. We cannot blame the Trade deficit as this has been negative yearly since the seventies something the world has accepted as the U.S. ‘exorbitant privilege’ [where the U.S. paid for goods with freshly produced dollars]. That it could be a factor now could only happen if this monetary system of ‘dollar hegemony’ was ending, or has ended. We do believe that that system is changing to a multi-currency one. Consequently, we see the dollar weakening for several years now.

Gold ETFs

Friday saw sales of 2.366 tonnes from the SPDR gold ETF but no change in the Gold Trust. The SPDR gold ETF and Gold Trust holdings are at 813.759 tonnes and at 211.86 tonnes respectively.

In the last week heavy persistent gold sales from the SPDR gold ETF have had absolutely no impact on the gold price as it soared up from the bounce straight through the $1,250 “Golden Cross’”.

We expect these sales to halt this week as the gold picture looks so positive.

Since January 6th 2017 13.162 tonnes have been added to the SPDR gold ETF and the Gold Trust.

 Julian D.W. Phillips 

 GoldForecaster.com | StockBridge Management Alliance 

Randgold ‘problem child’ gold mine coming right.

For any other mining company, the Tongon gold mine, owned and operated by Randgold Resources, might be deemed a great success.  But for Randgold, which likes to stick to its production projections for all its operations in West and Central Africa, it has been something of a problem child underperforming against its scheduled output targets due to a succession of technical issues.  But even so it has still been a significant producer of the yellow metal at the kind of levels that would still be the envy of many other mid-sized gold mining companies.

Randgold CEO, Mark Bristow, on the occasion of a visit to the mine and to its host country ahead of the company’s second quarter results, due out the first week of August, has told the media in Cote d’Ivoire’s capital, Abidjan, that Tongon  continues to ramp up production as it tracks its 2017 target of 285,000 ounces of gold, making it a globally significant gold producer, but with a relatively short four year life remaining.  But Bristow went on to say that with Tongon now operating to plan, its focus had shifted to finding additional reserves and resources to replace depleted ounces and extend the mine’s life beyond its four years remaining.  The chances are that Randgold will be able to achieve this as the area around Tongon is seen as highly prospective for smaller satellite orebodies – and the company has a good track record of eking extended lives out of its Malian gold operations – notably at Morila which is still producing gold despite originally being due for closure some years ago.

Bristow also confirmed his long held view of Cote d’Ivoire’s exceptional prospectivity and its positive attitude towards foreign investment in the gold mining sector.

Elsewhere in the West African nation, Bristow commented that Randgold’s exploration programmes have defined a large target at Boundiali in the Fonondara corridor, which he described as ‘potentially the most exciting gold prospect in West Africa’.  The company has just completed its annual review of its exploration targets, which Bristow said had also highlighted very positive results from its other holdings in the country.

As to Tongon itself, and its contribution to the Ivorian economy, Bristow commented that last quarter it declared its second dividend, of which the government’s share, including taxes, was US$20 million (FCFA 12 billion).  In total, Bristow claimed that the Tongon mine has contributed just under $1 billion (FCFA 520 billion) to the Ivorian economy in the form of royalties, taxes, dividends, salaries, payments to local suppliers and community investments since it started production in 2010.

We will presumably get a further update on Tongon when Randgold delivers its Q2 results on August 3rd when Bristow himself will also deliver an update to London analysts and media on the company’s overall performance so far this year and its future prospects.  Randgold has, unlike most of the other large global gold miners, managed to keep itself debt free and cashflow positive through maintaing some very strict new mine investment criteria.

Gold breaches $1,250 level as dollar enters bear market

 Gold Today –New York closed yesterday at $1,243.70. London opened at $1,247.00 today. 

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

         The $: € was much weaker at $1.1657 after yesterday’s $1.1532: €1.

         The Dollar index was much weaker at 94.09 after yesterday’s 94.77

         The Yen was stronger at 111.69 after yesterday’s 111.94:$1. 

         The Yuan was weaker at 6.7697 after yesterday’s 6.7549: $1. 

         The Pound Sterling was slightly weaker at $1.3001 after yesterday’s $1.3033: £1.

Yuan Gold Fix
Trade Date     Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    7    20

     2017    7    19           

     2017    7    18

SHAU

SHAU

SHAU

/

271.44

271.41

Trading at 273.6

271.36

271.17

$ equivalent 1oz at 0.995 fineness

@    $1: 6.7697

       $1: 6.7549

       $1: 6.7481     

  /

$1,244.87

$1,245.99

Trading at $1,252.06

$1,244.50

$1,244.88

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 only $0.80 lower than  Shanghai yesterday and has been trying to follow Shanghai all the way up, with London opening today at a discount to Shanghai’s trading today of $5.06 an narrower discount than  we have seen this week. Both London and New York are being pulled up by Shanghai. With this strong Chinese demand the chances of both London and New York breaking through $1,250 were greatly increased.  In the event gold did breach the $1,250 level.  The question is whether it can maintain this.

Today, the U.S. dollar weakened heavily after Draghi of the E.C.B.’s announcement.

Silver Today –Silver closed at $16.30 yesterday after $16.27 at New York’s close Wednesday.

LBMA price setting:  The LBMA gold price was set this morning at $1,247.25 from yesterday’s $1,239.85.  The gold price in the euro was set at €1,071.61 after yesterday’s €1.074.72.

Just after the opening of New York the gold price was trading at $1,249.75 and in the euro at €1,072.93. At the same time, the silver price was trading at $16.43. 

Price Drivers

The gold price is attacking overhead resistance in the $1,250 area. If it maintains its strength it will have broken overhead resistance.

Draghi was more dovish than the markets expected, basically saying that there will be no change in the stance of the E.C.B. We expected that that would slow or halt the rise of the euro, but not a bit of it. The euro is stronger again today, with a gold price in the euro that is slightly lower, while the gold price in the dollar is strong. As with the U.S. inflation is just not rising as the central banks want and need it to. Both the U.S. Fed and the E.U.’ E.C.B. will hold back tapering incentives until they see inflation and wages rise. We expect that will take a long, long time still.

Of very great significance is the dollar index. We now call the dollar bear market which has begun in earnest! We see the dollar weakening for several years now. We believe the world’s monetary system is confirming that it has entered a multi-currency system from the dollar hegemony system it has been in since the early 1970’. This means that gold will gather a far more significant role in the global monetary system as a reserve asset. Over time, from now on gold will improve its investor attraction considerably. Silver will follow it.

We expect the euro gold price to rise as Europeans are not selling gold, but we see them increasing their demand for gold. Gold continues to hold higher levels in the euro, which shows real demand for physical gold in the E.U.

Gold ETFs – Yesterday saw sales of 5.323 tonnes from the SPDR gold ETF and purchases of 0.45 of a tonne in the Gold Trust. The SPDR gold ETF and Gold Trust holdings are at 816.125 tonnes and at 211.86 tonnes respectively.

The U.S. selling from the SPDR gold ETF persists with very large sales of physical gold as the gold price rises. Clearly these investors are seeing the gold price being turned back at these levels. Yes, there may be institutional attempts to break the gold price down, but so far this week they have failed to do this. Chinese demand is strong simply because the economy and middle class are growing and is likely to continue to do so. We see the sellers halting sales if the gold price confirms it has broken overhead resistance and rises. Then we expect to see U.S. demand come in strongly. We do not underestimate the demand from LMEprecious arbitraging gold into Hong Kong. Gold price differentials between London and China are already narrowing!

Since January 6th 2017 15.528 tonnes have been added to the SPDR gold ETF and the Gold Trust.

Julian D.W. Phillips 

 GoldForecaster.com | StockBridge Management Alliance 

Gold rise pace slowing down

Gold Today –New York closed yesterday at $1,242.10. London opened at $1,239.00 today. 

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

         The $: € was stronger at $1.1532 after yesterday’s $1.1559: €1.

         The Dollar index was slightly stronger at 94.77 after yesterday’s 94.64

         The Yen was stronger at 111.94 after yesterday’s 112.44:$1. 

         The Yuan was weaker at 6.7549 after yesterday’s 6.7481: $1. 

         The Pound Sterling was slightly stronger at $1.3033 after yesterday’s $1.3026: £1.

Yuan Gold Fix
Trade Date     Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    7    19

     2017    7    18           

     2017    7    17

SHAU

SHAU

SHAU

/

271.41

270.20

Trading at 271.95

271.17

270.16

$ equivalent 1oz at 0.995 fineness

@    $1: 6.7549

       $1: 6.7481

       $1: 6.7704     

  /

$1,245.99

$1,222.72

Trading at $1,247.22

$1,244.88

$1,223.59

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 $2.78 lower than Shanghai’s close yesterday, with London opening today at a discount to Shanghai’s trading today of $8.22, a slightly widening discount to Shanghai. But London is being pulled up by Shanghai. Chinese demand is sufficient to lift prices there, despite the slower rise in the gold price in London. This bodes well for more rises in London and New York.

Today, the U.S. dollar recovered slightly, a normal market correction that does not deviate from its downward path. With the E.C.B. meeting tomorrow traders are now cautious and prefer to wait before taking new positions in the euro.

Silver Today –Silver closed at $16.27 yesterday after $16.12 at New York’s close Monday.

LBMA price setting:  The LBMA gold price was set today at $1,239.85 from yesterday’s $1,237.10.  The gold price in the euro was set at €1,074.72 after yesterday’s €1.070.25.

Ahead of the opening of New York the gold price was trading at $1,239.85 and in the euro at €1,075.51. At the same time, the silver price was trading at $16.23. 

Price Drivers

The gold price is slowing its rise towards $1,250 and may struggle in the $1,240 area until after the E.C.B. meeting and the effect the meeting has on exchange rates thereafter.

We do expect that if Draghi is more dovish than the markets expects, the rise of the euro may halt, for now. If he is the slightest bit hawkish, we would expect to see the euro rise further. With inflation and wages performing less than expected we would expect him to caution against too many expectations concerning the withdrawal of stimulus measures too soon. He may well send out a similar message to the one Janet Yellen is sending out. Either way we do expect him to have a distinct impact on global financial markets, including gold and silver.

Gold continues to rise in the euro, which shows real demand for physical gold in the E.U.

Gold ETFs 

Yesterday saw sales of 5.662 tonnes from the SPDR gold ETF but no change again, in the holdings of the Gold Trust. The SPDR gold ETF and Gold Trust holdings are at 821.448 tonnes and at 211.41 tonnes respectively.

These sales are substantial enough to move the gold price down, but they didn’t as the gold price continued to climb. We suspect that the physical gold being sold is being snapped up and on its way to China. The new ability to arbitrage between LMEprecious and Hong Kong is seeing high volumes right from the start. They may be responsible for the physical gold being arbitraged to Hong Kong. If that is true, we would expect not only the differential between London and Shanghai to narrow considerably, but for the lifting of the gold price in Shanghai to feed through to London quickly!

Since January 6th 2017 20.401 tonnes have been added to the SPDR gold ETF and the Gold Trust.

Julian D.W. Phillips 

GoldForecaster.com | StockBridge Management Alliance 

Gold and Silver continue on upwards patgh

 Gold Today –New York closed yesterday at $1,234.00. London opened at $1,237.00 today. 

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

         The $: € was much weaker at $1.1559 after yesterday’s $1.1457: €1.

         The Dollar index was much weaker at 94.64 after yesterday’s 95.21

         The Yen was stronger at 112.14 after yesterday’s 112.44:$1. 

         The Yuan was much stronger at 6.7481 after yesterday’s 6.7704: $1. 

         The Pound Sterling was weaker at $1.3026 after yesterday’s $1.3066: £1.

Yuan Gold Fix

Trade Date     Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    7    17

     2017    7    13           

     2017    7    12

SHAU

SHAU

SHAU

/

270.20

267.54

Trading at 271.00

270.16

267.99

$ equivalent 1oz at 0.995 fineness

@    $1: 6.7481

       $1: 6.7704

       $1: 6.7821     

  /

$1,236.31

$1,222.72

Trading at $1,244.10

$1,236.13

$1,223.59

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 yesterday, with London opening today at a discount to Shanghai’s trading today of $7.10, the same discount to Shanghai we saw yesterday. But London is being pulled up by Shanghai. Shanghai  in  turn was pulling back today from its high as the Yuan strengthened, bringing Shanghai’s gold price to the same differential as it had yesterday.

We see the dollar now in a ‘bear’ market so we expect gold to continue to rise in dollar terms, alongside currencies. This is a time to be long in dollar terms, as opposed to the euro or other solid currencies.

Silver Today –Silver closed at $16.12 yesterday after $15.95 at New York’s close Friday.

LBMA price setting:  The LBMA gold price was set today at $1,237.10 from yesterday’s $1,229.85.  The gold price in the euro was set at €1,070.25 after yesterday’s €1.071.03.

Ahead of the opening of New York the gold price was trading at $1,237.75 and in the euro at €1,071.65. At the same time, the silver price was trading at $16.17. 

Price Drivers

The gold price continues to rise towards $1,250 at which point we may see it turn down or break through higher. That is a key level for gold. At the moment we look at the euro price of gold to see what the underlying behavior of gold really is. With the dollar weakening so much, the gold price in the dollar reflects the falling dollar not the gold price. Technically it has risen above its 200-day moving average.

You will see that in the euro it fell a euro at the fixing in London. However it continues to rise in the Yuan as the Yuan itself, rises against the dollar.

Gold ETFs

As you can see below the sales from the SPDR gold ETF are tapering off. They are now not large enough to impact the gold price.

ECB

All eyes are on Draghi of the E.C.B. They are waiting to see if he raises rates [which we doubt] or delays the peeling back of the Bond buying program. Inflation figures in the E.U. are doing the same as they are doing in the U.S.A.

Meanwhile the markets are discounting an earlier unwinding of stimulus from the E.C.B. But the E.U. is seeing falling inflation, just as is being seen in the U.S. and likely for similar reasons. Wages are not rising as they should be in healthy economies. Artificial intelligence is decimating jobs there too, so the quality of jobs being gained is not such that workers can push for higher wages.

It may be that Draghi therefore, expresses caution when discussing the tapering of stimuli, sending the equity markets higher and the euro slowing the pace of its rise against the dollar.  

Gold ETFs

Yesterday saw sales of 1.775 tonnes from the SPDR gold ETF but no change in the holdings of the Gold Trust. The SPDR gold ETF and Gold Trust holdings are at 827.067 tonnes and at 211.41 tonnes respectively.

Since January 6th 2017 26.063 tonnes have been added to the SPDR gold ETF and the Gold Trust.

 Julian D.W. Phillips 

 GoldForecaster.com | StockBridge Management Alliance 

Russia collusion claims a diversion; Gold has a positive week; China and Europe top performing markets

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

Gold got a boost Friday on weaker-than-expected inflation and retail sales figures, casting doubt on the Federal Reserve’s ability to continue normalizing interest rates this year.

Consumer prices rose slightly in June, at their slowest pace so far this year. The consumer price index (CPI), released on Friday, showed the cost of living in America rising only 1.6 percent compared to the same month last year, significantly down from the most recent high of 2.8 percent in February and below the Fed’s target of 2 percent. Much of the decline was due to energy prices, which fell 1.6 percent from May.

consumer prices continued to expand in june yet at a slower pace
click to enlarge

As I’ve explained elsewhere, CPI is an important economic indicator for gold investors to track. The yellow metal has historically responded positively when inflation rises—and especially when it pushes the yield on a government bond into negative territory. Why lock your money up in a 2-year or 5-year Treasury that’s guaranteed to give you a negative yield?

portfolio manager samuel paleaz poses near equipment in macraes the largest gold mine in new zealand

But right now the gold Fear Trade is being supported by what some are calling turmoil in the Trump administration. Last week the Russia collusion story took a new twist, with emails surfacing showing that Donald Trump Jr.; Jared Kushner, the president’s son-in-law and now-senior advisor; and former Trump campaign manager Paul Manafort all agreed to meet with a Russian lawyer last summer under the pretext that she had dirt on Hillary Clinton.

Whether or not this meeting is “collusion” is not for me to say, but the optics of it certainly look bad, and it threatens to undermine the president’s agenda even more. For the first time last week, an article of impeachment was formally introduced on the House floor that accuses Trump of obstructing justice. The article is unlikely to go very far in the Republican-controlled House, but it adds further uncertainty to Trump’s ability to achieve some of his goals, including tax reform and infrastructure spending. I’ll have more to say on this later

A Contrarian View of China

A new report from CLSA shows that Asian markets and Europe were the top performers during the first six months of the year. Korea took the top spot, surging more than 25 percent, followed closely by China.

asia and europe are the top market drivers so far this year
click to enlarge

Despite persistent negative “news” about China in the mainstream media, conditions in the world’s second-largest economy are improving. Consumption is up and household income remains strong. The number of high net worth individuals (HNWIs) in China—those with at least 10 million renminbi ($1.5 million) in investable income—rose to 1.6 million last year, about nine times the number only 10 years ago. It’s estimated we could see as many as 1.87 million Chinese HNWIs by the end of 2017.

According to CLSA, global trade is robust, with emerging markets, and particularly China, driving most of the acceleration this year. In the first three months of 2017, global trade grew 4 percent compared to the same period last year, its fastest pace since 2011.

“Indeed the early months of 2017 have seen China become easily the biggest single country driver of Asian trade growth,” writes Eric Fishwick, head of economic research at CLSA.

A lot of this growth can be attributed to Beijing’s monumental One Belt, One Road infrastructure project, which I’ve highlighted many times before. But according to Alexious Lee, CLSA’s head of China industrial research, a “more nationalist America” in the first six months of the year has likely given China more leverage to assume “a larger global, and especially regional, leadership role.”

This comports with what I said back in January, in a Frank Talk titled “China Sets the Stage to Replace the U.S. as Global Trade Leader.” With President Donald Trump having already withdrawn the U.S. from the Trans-Pacific Partnership (TPP) and promising to renegotiate or tear up other trade agreements—he recently tweeted that the U.S. has “made some of the worst Trade Deals in world history”—China has emerged, amazingly, as a champion of free trade, a position of power it will likely continue to capitalize on.

The country’s overseas construction orders have continued to expand, with agreements signed since 2013 valued at more than $600 billion.

business is booming for china
click to enlarge

 

Emerging Europe Expected to Remain Strong

Another recent report, this one from Capital Economics, shows that the investment case for emerging Europe remains strong in 2017. Russia is expected to strengthen over the next 12 months, while Poland, Hungary, the Czech Republic and Slovakia are likely to remain attractive.

“Russia’s economy has pulled out of recession and growth in the coming quarters will be stronger than most anticipate,” the research firm writes, adding that its central bank’s loosening of monetary policy should support the recovery even further.

To be sure, the region faces strong headwinds, including a rapidly aging population and the loss of an estimated 20 million skilled workers to foreign markets over the past 25 years, according to a July 11 presentation from the International Monetary Fund (IMF).

But I believe that as conditions in central emerging Europe countries continue to improve, many of those workers will be returning home. Life in the region is not the same as it was 10 or 20 years ago, when good jobs might have been scarce. Firms are now growing at a healthy rate and hiring more workers. As you can see below, unemployment rates in Poland, Hungary and the Czech Republic have been falling steadily since at least 2012 and are now lower than the broader European Union.

emerging europe countries hard at work
click to enlarge

This strength is reflected in emerging Europe’s capital markets. For the 12-month period as of July 12, Hungary’s Budapest Stock Exchange is up 38 percent. Poland’s WIG20 is up more than 43 percent. Meanwhile, the STOXX Europe 600 Index—which includes some of the largest Western European companies—has made gains of only 17 percent over the same period.

Markets Still Believe in Trump

As we all know, the mainstream media’s criticism and ire aren’t reserved for China alone. Ninety-nine percent of the media right now is against President Trump, for a number of reasons—some of them deserved, some of them not.

Markets, however, seem not to care what the media or polls have to say. The Dow Jones Industrial Average continues to hit new all-time highs. Even though it’s stalled a few times, the “Trump rally” appears to be in full-speed-ahead mode, more than eight months after the election.

Back in November, I wrote about one of my favorite books, James Surowiecki’s The Wisdom of Crowds, which argues that large groups of people will nearly always be smarter and better at making predictions than an “elite” few. Surowiecki’s ideas were vindicated last year when investors accurately predicted Trump’s election, with markets turning negative between July 31 and October 31.

For the same reason, I think it’s important we pay close attention to what markets are forecasting today.

The White House is under siege on multiple fronts, which, as I said, has been positive for gold’s Fear Trade. But equity investors also seem to like the direction Trump is taking, whether it’s pushing for tax reform and deregulation or shaking up the “beltway party,” composed of deeply entrenched D.C. lobbyists and career bureaucrats. Just last week, the president made waves for firing a number of bureaucrats at the Department of Veteran Affairs (VA), long plagued by scandal and controversy. Since he took office in January, Trump has told more than 500 VA workers “You’re fired!”

The Fundamentals of “Quantamental”

Of course, we look at so much more than government policy when making investment decisions. We take a blended approach of not only assessing fundamentals such as market share and returns on capital but also conducting quantitative analysis.

It’s this combination that some in the industry are calling “quantamental” investing. At first glance, “quantamental” might sound like nothing more than cute wordplay—not unlike “labsky,” “bullmation” and other clever names we give mixed-breed dogs—but it’s rapidly replacing traditional investment strategies at the institutional level.

Business Insider puts it in simple terms: “Quantamental managers combine the bottom-up stock-picking skills of fundamental investors with the use of computing power and big-data sets to test their hypotheses.”

See my Vancouver Investment Conference presentation, “What’s Driving Gold: The Invasion of the Quants,” to learn more about how we use quantitative analysis, machine learning and data mining.

Wall Street: The Birthplace of American Capitalism and Government

moments after closing bell june 29

The concept of quantamentals helps explain our entry into smart-factor ETFs. As most of you already know, members of my team and I visited the New York Stock Exchange (NYSE) three weeks ago to mark the launch of our latest ETF.

While there, Doug Yones, head of exchange-traded products at the NYSE, gave us a short history lesson about the exchange and surrounding area.

Most investors are aware that the NYSE, which is celebrating its 225th anniversary this year, is the epicenter of capitalism—not just in the U.S. but also globally.

moments after closing bell june 29

What many people might not realize is that on the site where the exchange now stands, Alexander Hamilton, the first U.S. treasury secretary, floated bonds to replace the debt the nascent country had incurred during the Revolutionary War.

Right next door to the NYSE is Federal Hall, where George Washington took his first oath of office in April 1789. The building today serves as a museum and memorial to the first U.S. president, whose statue now looks out over Wall Street and its passersby.

In this one single block of Wall Street, therefore, American capitalism and government were born. Here you can find the essential DNA of the American experiment, which, over the many years, has fostered our entrepreneurial spirit to form capital and to create new businesses and jobs. Growth, innovation and competition run through our veins, and that’s largely because of the events that unfolded centuries ago at the NYSE and Federal Hall.

Gold and silver: Mood changing for the better

Gold Today –New York closed yesterday at $1,228.40. London opened at $1,230.00 today. 

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

         The $: € was weaker at $1.1457 after yesterday’s $1.1402: €1.

         The Dollar index was weak at 95.21 after Friday’s 95.75

         The Yen was stronger at 112.44 after Friday’s 113.03:$1. 

         The Yuan was stronger at 6.7704 after Friday’s 6.7821: $1. 

         The Pound Sterling was stronger at $1.30.66 after Friday’s $1.2927: £1.

Yuan Gold Fix
Trade Date     Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    7    17

     2017    7    13           

     2017    7    12

SHAU

SHAU

SHAU

/

267.54

268.39

Trading at 270.30

267.99

268.58

$ equivalent 1oz at 0.995 fineness

@    $1: 6.7704

       $1: 6.7821

       $1: 6.7995     

  /

$1,221.97

$1,222.72

Trading at $1,236.77

$1,224.03

$1,223.59

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 rose higher than Shanghai’s close on Friday, with a premium to Shanghai of $4.40 with London opening today at a discount to Shanghai’s trading today of $6.77, a marginally lower discount to Shanghai than we saw on Friday. We see this difference between London and New York because London is the western world’s center of physical dealing and New York a financial market not a physical gold market.

With the dollar weakening to dangerously low levels on the index, we are on the brink of a dollar ‘bear’ market  while, after  strong economic growth of 6.9% for the last month, the Yuan is strengthening [with a little help from the P.B. of C.] But the fall of the dollar is against all currencies.

Silver Today –Silver closed at $15.95 Friday after $15.92 at New York’s close Thursday.

LBMA price setting:  The LBMA gold price was set today at $1,229.85 from Friday’s $1,221.40.  The gold price in the euro was set at €1,072.70 after Friday’s €1.071.03.

Ahead of the opening of New York the gold price was trading at $1,234.85 and in the euro at €1,076.73. At the same time, the silver price was trading at $16.16. 

Price Drivers

At the moment gold continues to see a rebound after its fall from $1,250. We would expect more of that today. This is despite the ongoing selling from the SPDR gold ETF on Friday. What does this tell us about U.S. gold investors ‘net’ opinions? It tells us that the view of U.S. investors continues to see gold as falling after the rebound, but dealer’s opinions are different in the shorter term as they lifted prices higher.

The Fed

Janet Yellen’s comments Friday were followed by the publication of the latest CPI numbers which showed that the belief that the poor data, issued on Friday, which led the Fed to say it was a temporary setback, looks like turning out to be more permanent. With this in mind and indeed if this proves to be so, we may not see another rate hike in 2017. Equity markets have not yet discounted this, but it is being reflected in the dollar’s exchange rate. Once it is factored in, we expect more ‘bubble’ rises in U.S. equities [albeit against better earnings results from the corporate sector] as the prospect of better yields in these markets, for much longer, attracts funds.

ECB

Meanwhile the markets are discounting an earlier unwinding of stimulus from the E.C.B. boosting prospects in Europe likely ahead of those we see in the U.S.

We see all of the above as a changing of the mood in financial markets. The dollar is getting to dangerous levels in its weakness, as Chinese demand rises alongside a robust economy continuously bringing the new rich into the gold market on an ongoing basis.  Expectations in the E.U. and China are getting stronger [for the euro as well] and are getting weaker in the U.S.A. They are now affecting foreign exchange markets directly and, by extension, the gold market. You saw the strength of the euro reflected in the earlier, almost unchanged euro gold price. But ahead of the opening of New York, we saw the euro gold price begin to rise too.

We are around six weeks away from the start of the ‘gold season’ so the time in which the bears can attack is reducing by the day.

Gold ETFs

Friday saw sales of 3.549 tonnes from the SPDR gold ETF but no change in  the holdings of the Gold Trust. The SPDR gold ETF and Gold Trust holdings are at 828.842 tonnes and at 211.41 tonnes respectively.

Since January 6th 2017 27.838 tonnes have been added to the SPDR gold ETF and the Gold Trust.

Julian D.W. Phillips 

GoldForecaster.com | StockBridge Management Alliance 

Six recent posts by Lawrie on sharpspixley.com

I’ve been a little lax about linking here to my articles published on the Sharps Pixley website but here are links to six I have published so far this month.  They look at the gold and silver markets as well as pgms.  Click on the titles to read the full articles.  To keep up with my thoughts on precious metals, and a whole host of other precious metals news stories from around the world, take a regular look at info.sharpspixley.com

Indian gold imports: High but ignore the hype!

13 Jul 2017 – Indian gold imports this year have already surpassed the full year 2016 level, but its probably best to ignore some of the year on year growth media hype given how low the figures were for H1 2016.

Implications for silver of Tahoe’s Escobal shutdown

12 Jul 2017 – Any impact on the supposedly temporary enforced closure of Tahoe Resources’ Escobal mine, the world’s second largest primary silver mine by Guatemala’s supreme court may only have a very limited impact on global silver fundamentals and the metal price.

Palladium closing gap on platinum – but neither great long term

11 Jul 2017 – In the past year the palladium price has moved up and platinum down and there is a real prospect of the former overtaking the latter in the near future.

So what’s happening to gold – and silver?

10 Jul 2017 – Gold, which had been showing signs of strength saw some huge trading volumes late last week which prompted a price slump, while silver fared even worse with the GSR rising to almost 80.

Gold overall H1 performance matches dollar index decline

04 Jul 2017 – H1 commodity price changes very positive for palladium while gold rise pretty well matches fall in dollar index. Silver disappoints. Iron ore worst performer.

 

Chinese gold demand up a little y-o-y but still well down on 2015

04 Jul 2017 – After a blip in May, Chinese gold demand as represented by Shanghai Gold Exchange withdrawals is now a little higher than at the same time a year ago, but still well down on the record 2015 figure.

 

 

Commodity Cycle Upturn Should Lift Precious Metals Prices

by: Stefan Gleason*

The inverse of the extreme overvaluation in equities is the extreme relative cheapness of hard assets. Commodity indexes entered the summer at generational lows in real terms.

Equities Expensive, Commodities Cheap? Chart

The perception has been that the world is awash in plentiful, cheap oil. Just a few years ago, with oil over $100 per barrel, the headlines blared warnings about peak oil and supply shortages. At major cyclical turning points in commodity markets, the news tends to reinforce whatever trends brought about major highs or lows in prices.

What investors need to keep in mind is that commodity markets are always cyclical in nature. No matter how bullish or bearish the outlook happens to appear at any given time, prices will eventually turn and trend in the opposite direction.

Oil and agricultural commodities perked up as summer officially began. Whether it’s the start of a major cyclical bull market remains to be seen. But the supply and demand fundamentals are setting up bullishly for commodities markets.

Lower Prices Stunt Production & New Shortages Push Up Prices

The cycle for any commodity follows the same basic pattern. When prices are low, production falls. As new supplies diminish, the market tightens and prices move higher. The higher prices incentivize producers to invest in production capacity and increase output.

Eventually, the market becomes oversupplied, prices fall, and the cycle starts all over again.

As a resource investor, it’s important to have some idea of whether you’re investing in a commodity at a time in the cycle when it’s favorable to do so. Gold, for example, tends to be less correlated to swings in the economy than oil and industrial commodities. It responds more to investor fear and flight from paper asset markets.

Gold prices crashed from $850/oz in 1980 to $300/oz in 1982. It wasn’t until 2002 that gold crossed above the $300 level for the final time. The new gold bull market rose out of a 20-year base and reached a cyclical high of $1,900 in 2011. A four-year downturn followed, and since 2016 a new cyclical upturn appears to be taking shape.

Chart reading is always a tenuous undertaking, but when combined with supply and demand fundamentals it can help investors identify favorable times to be a buyer or seller. Right now it appears that gold, silver, oil, and other commodities are transitioning one by one into a period in the commodity cycle of diminishing supply.

In the case of crude oil, the major storyline in recent months has been a supply glut. North American shale production has swelled inventories in the U.S.

The longer-term supply outlook actually augurs for shortfalls… and much higher prices.

Curde Oil

According to the International Energy Agency (IEA), new oil discoveries last year sunk to their lowest number in decades.

The IEA warns that in order to offset recent declines and meet rising global demand, the oil industry will need to develop 18 billion new barrels every year between 2017 and 2025.Oil’s recent price range in the low $40s to $50s per barrel doesn’t seem to be incentivizing the necessary new production capacity.

Higher energy costs would mean higher production costs for the gold and silver mining industry. Mines are already having to process more and more tons of earth to extract ounces of precious metals.

According to metals analyst Steve St. Angelo, “The global silver mining industry will continue to process more ore to produce the same or less silver in the future. While the cost of energy has declined over the past few years, falling ore grades will continue to put pressure on the silver mining industry going forward.”

The cycle appears to be in the early stages of turning bullish for commodity prices – making it a favorable time to be taking out long positions in hard assets. That doesn’t necessarily mean metals markets will immediately begin moving up in a big way.

Gold and silver still face potential headwinds from two sources: first, another Fed rate hike or two before year end; and second, a vowed gradual reduction of the central bank’s QE-bloated balance sheet, which could cause longer-term bond yields to go up.

Contrary to popular misconceptions, nominal increases in interest rates aren’t inherently negative for metals prices. More important is whether inflation, and expectations of future inflation rates, are rising or falling relative to interest rates. If oil prices break out of their trading range to the upside, that could help ignite inflationary fires.

Global gold and silver prices rebounding

Gold Today –New York closed yesterday at $1,220.30. London opened at $1,222.15 today. 

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

         The $: € was stronger at $1.1402 after yesterday’s $1.1448: €1.

         The Dollar index was almost unchanged at 95.75 after yesterday’s 95.76

         The Yen was stronger at 113.03 after yesterday’s 113.36:$1. 

         The Yuan was stronger at 6.7821 after yesterday’s 6.7881: $1. 

         The Pound Sterling was stronger at $1.2927 after yesterday’s $1.2855: £1.

Yuan Gold Fix
Trade Date     Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    7    13

     2017    7    12            

     2017    7    11

SHAU

SHAU

SHAU

/

268.39

267.30

Trading at 269.60

268.58

267.30

$ equivalent 1oz at 0.995 fineness

@    $1: 6.7821

       $1: 6.7995

       $1: 6.8034     

  /

$1,222.72

$1,217.03

Trading at $1,231.42

$1,223.59

$1,217.03

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 followed Shanghai higher yesterday leaving a $2.40 differential. Today, London turned higher, also following Shanghai but raising the differential to $9.27 from yesterday’s $7.

All global gold markets are seeing a rebound from the breakdown of the Technical picture from $1,250.  

Silver Today –Silver closed at $15.92 yesterday after $15.84 at New York’s close Monday.

LBMA price setting:  The LBMA gold price was set today at $1,221.40 from yesterday’s $1,219.40.  The gold price in the euro was set at €1,071.03 after yesterday’s €1.064.23.

Ahead of the opening of New York the gold price was trading at $1,220.80 and in the euro at €1,071.35. At the same time, the silver price was trading at $15.90. 

Price Drivers

The gold price is rebounding and not simply because it is a natural market move to do so. Janet Yellen’s comments yesterday in front of the Senate are playing a part. We expect more of the same from her today.

The Fed

Janet Yellen’s comments yesterday made it clear that the Fed wants a ‘neutral’ interest rate, neither higher than inflation nor lower. At the moment it is lower, but with inflation falling in the U.S. the Fed may well delay another rate hike beyond year’s end because they may  see ‘neutral’ rates without raising rates again this year. This has softened the dollar, which at one point nearly touched the point at which the dollar falls into a ‘bear’ market. We see that as coming very soon. It will benefit the dollar gold price.

The Gold Price

We do note that with demand and supply nearly in balance in London before the breakdown the sales over two weeks of 27 tonnes of physical gold into the London Market tipped that balance and the price fell.

What is important to understand about the gold price is that it does not reflect total demand and supply. For instance, in June, some reports suggest 220 tonnes of gold were sold into India (Although others suggest a much smaller 75 tonnes – Editor). This did not impact the gold price, because it did not go through the market. It was contracted and a price between the contractors was set against the afternoon price setting in London. It did not travel through the market. But sales from the SPDR cause the Custodian to unload that gold into the London market, which does affect the price. Essentially, the gold price is determined by  what is called the ‘marginal’ supply and demand, that is the unforeseen amount that are needed or got rid of in the market. Of course, this does not reflect total demand and supply and allows speculators considerably more pricing power than would be the case if all gold sales and purchases do go through the market.

In China there is an interbank market in gold, which operates off market, but the bulk of the physical gold bought and sold does go through the Shanghai  Exchange . With both an institutional and now a retail physical arbitrage market between London and Shanghai in operation Chinese and other international investors can affect price by dealing between the markets.

We believe that where gold is contracted between two parties they may  well find that the Shanghai Benchmark prices are more reflective of a truer gold price than the LBMA gold price settings and adjust the price they use to Shanghai’s in the future, as some exchanges are already doing.

Gold ETFs

Yesterday saw no sales or purchases from or into the SPDR gold ETF or the Gold Trust. The SPDR gold ETF and Gold Trust holdings are at 832.391 tonnes and at 211.41 tonnes respectively.

Julian D.W. Phillips 

GoldForecaster.com | StockBridge Management Alliance 

Gold and silver confirm the bottom is in

 Gold Today –New York closed yesterday at $1,216.40. London opened at $1,218.50 today. 

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

         The $: € was weaker at $1.1448 after yesterday’s $1.1396: €1.

         The Dollar index was weaker at 95.76 after yesterday’s 96.11

         The Yen was stronger at 113.36 after yesterday’s 114.32:$1. 

         The Yuan was stronger at 6.7881 after yesterday’s 6.7995: $1. 

         The Pound Sterling was weaker at $1.2855 after yesterday’s $1.2902: £1.

Yuan Gold Fix
Trade Date     Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    7    12

     2017    7    11            

     2017    7    10

SHAU

SHAU

SHAU

/

267.30

267.12

Trading at 269.00

267.30

266.45

$ equivalent 1oz at 0.995 fineness

@    $1: 6.7995

       $1: 6.8034

       $1: 6.7990     

  /

$1,217.03

$1,215.95

Trading at $1,225.51

$1,217.03

$1,212.89

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.]

 Both New York and London turned higher yesterday. New York rose to Shanghai’s level again, at the close yesterday and London today went higher but still left a differential with Shanghai at $7 which was lower than yesterday’s differential. All global gold markets have found their bottom.

Today –Silver closed at $15.84 yesterday after $15.66 at New York’s close Monday.

LBMA price setting:  The LBMA gold price was set today at $1,219.40 from yesterday’s $1,211.90.  The gold price in the euro was set at €1,064.23 after yesterday’s €1.063.26.

Ahead of the opening of New York the gold price was trading at $1,217.20 and in the euro at €1,062.69. At the same time, the silver price was trading at $15.83. 

Price Drivers

The gold price has confirmed the bottom is in and it rose to $1,219 this morning in London. The support at the $1,200 level is very large.  But you will note that in the euro, it has barely moved. We see the weakening dollar playing a strong role in the dollar gold price going forward. This means that we must gauge the gold price by looking at it in different currencies as well as the dollar.

Demand from China remains strong as you can see from the numbers out of Shanghai [above], but demand out of India is scant.

The buying in India ahead of the new GST tax took demand away for a period after its imposition. Once this is soaked up by the market, demand will return to normal. With the Monsoon still underway we do not expect demand to pick up until the end of August.

Trump or A.I.

The media in the U.S. is hounding President Trump and his family relentlessly. But now they are attributing his son’s actions in meeting Russians as a reason for Treasury yields moves. The impact they are having is that the new Administration’s plans on stimulating the economy and ‘draining the swamp’ have led to the Administration finding they are stuck in the mud and can’t get going on their plans. This in itself is weakening the dollar and holding back the economy from becoming robust.  Markets will price this in, not the Trump/Russia issue.

What is now coming to the fore in matters concerning the dollar and the Fed is falling inflation and the failure of wages to rise as expected with ‘full’ employment. While we have been highlighting artificial intelligence as a major economic factor for years now, we see banks recognizing it a contributing strongly to the poor quality jobs being taken up and for workers inability to wage bargain. We see A.I. continuing to do this in the years ahead and now likely to affect Fed policy on interest rates. The impact will be increasingly dovish and lead to the dollar weakening over the years ahead. It is already close to entering a bear market. The same problem is being felt in all industrialized countries including China.

Gold ETFs

Yesterday saw no sales or purchases from or into the SPDR gold ETF or the Gold Trust. The SPDR gold ETF and Gold Trust holdings are at 832.391 tonnes and at 211.41 tonnes respectively.

Julian D.W. Phillips 

GoldForecaster.com | StockBridge Management Alliance 

Gold and Silver: Is the bottom in yet?

Gold Today –New York closed yesterday at $1,214.10. London opened at $1,210 today. 

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

         The $: € was stronger at $1.1396 after yesterday’s $1.1408: €1.

         The Dollar index was weaker at 96.11 after yesterday’s 96.15

         The Yen was weaker at 114.32 after yesterday’s 114.21:$1. 

         The Yuan was stronger at 6.7995 after yesterday’s 6.8034: $1. 

         The Pound Sterling was stronger at $1.2902 after yesterday’s $1.2873: £1.

Yuan Gold Fix
Trade Date     Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    7    11

     2017    7    10            

     2017    7    7

SHAU

SHAU

SHAU

/

267.12

269.34

Trading at 267.70

266.45

269.52

$ equivalent 1oz at 0.995 fineness

@    $1: 6.7995

       $1: 6.8034

       $1: 6.7990     

  /$1,215.95

$1,232.15

Trading at $1,219.30$1,212.89

$1,232.98

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.]

 Both New York and London turned higher yesterday. New York rose to Shanghai’s level at the close yesterday and London today is pulling the gold price down leaving the differential with Shanghai at just over $9 lower than yesterday’s differential. All global gold markets are looking for a bottom still. But as we mentioned yesterday there is an almost osmotic pressure in London that is shifting physical gold to the Far East constantly, in line with the price differentials between London and Shanghai.

Arbitrage between London & Hong Kong

Yesterday we saw the announcement that dual-currency gold futures contract is now available in Hong Kong that is physically settled, linked to a gold contract which is traded on the new gold exchange in London as part of LMEprecious on the LME.

This has now taken what was essentially the sole domain of the Bullion banks down to the retail investor trading futures. But this contract is very different from the normal futures contract:

  • It is the first time there is a contract in two currencies [the U.S. $ and the Yuan.
  • This contract is not a cash contract but a physical delivery in Hong Kong of gold contract, and in London at LME Gold
  • It is the first and only on-exchange, spot to five-year ‘loco London’ contract in the world.

Why is it so important? It’s because investors can now arbitrage between Yuan futures, and the synthetic currency prices derived from dual currency gold contracts. Physical settlement is important, too. If these contracts were purely cash-settled, there could be a price discrepancy between the US$ and Yuan tranches.

Silver Today –Silver closed at $15.66 yesterday after $15.56 at New York’s close Friday.

LBMA price setting:  The LBMA gold price was set today at $1,211.90 from yesterday’s $1,207.55.  The gold price in the euro was set at €1,063.26 after yesterday’s €1.069.40.

Ahead of the opening of New York the gold price was trading at $1,210.15 and in the euro at €1,061.63. At the same time, the silver price was trading at $15.53. 

Price Drivers

The gold price is still searching for a bottom but appears to be settling above $1,200 for the time being. The main force driving it down is sales from the SPDR gold ETF. At the moment U.S. institutions are simply looking at the impact of higher interest rates and falling inflation on the returns gold can bring to investors. Such an attitude ignores long term realities in the global monetary system. However, it rules, at present. We expect that the huge amount of work done to date this year on the gold price above $1,200 will temper further falls, but let’s see!

We are the only publication we know of that discusses the Shanghai Gold Exchange in the context of a global gold market. We do this because the global gold market is evolving at a rapid rate. The Shanghai Gold Exchange is the largest physical gold Exchange in the world and trades around 90% of the world’s physically traded gold in the world [New York and London trade ‘paper’ gold contracts and trades over 90% of the world’s gold derivative contracts]. With the advent of the dual currency, physically traded, gold futures, contract traded both in London and in Hong Kong, western investors can now join the global gold market in physical gold. More importantly, this ability to arbitrage, as we have mentioned so often, enables global gold prices to be smoothed out. If successful, we will see another force removing price differentials between global markets.

Gold ETFs

Yesterday saw sales of 2.954 tonnes from the SPDR gold ETF but a purchase into the Gold Trust of 0.65 of a tonne. The SPDR gold ETF and Gold Trust holdings are at 832.391 tonnes and at 211.41 tonnes respectively.

Since January 6th 2017 31.387 tonnes have been added to the SPDR gold ETF and the Gold Trust.

Julian D.W. Phillips 

 GoldForecaster.com | StockBridge Management Alliance 

Price Manipulation in the Gold and Silver markets

Interview with: Chris Powell by Mike Gleason*

Futures Markets Give High-Volume Trading Discounts to Governments

Mike Gleason: It is my privilege now to welcome in Chris Powell, Secretary-Treasurer at the Gold Antitrust Action Committee, also known as GATA. Chris is a long-time journalist and hard money advocate, and through his tireless efforts at GATA he is working to expose the manipulation of the gold and silver markets. Through GATA’s work over the years. Some important revelations have come to light, which quite honestly should concern everyone.

It’s great to have him back on with us. Chris, how are you, and thanks for taking the time to talk with us today.

Chris Powell: Great to be with you Mike.

Mike Gleason: Well it’s been more than a year since the last time we had you on, and there actually are some developments finally in the whole precious metals manipulation realm, specifically Deutsche Bank coming under fire for rigging gold and silver markets. Talk about this Chris, bring us up to date here on the whole lawsuit, and then give us your thoughts on whether or not this is going to finally get us somewhere on ending the manipulation that has occurred in the precious metals markets for years, if not decades.

Chris Powell: Sure Mike. Deutsche Bank has essentially confessed to manipulating the gold and silver futures markets. It has offered to settle the antitrust lawsuits against it for manipulation for just a little less than $100 million. More importantly, I think the bank has volunteered to provide the antitrust lawsuit plaintiffs with evidence against other bullion banks that participated with the Deutsche Bank traders in the manipulation of the gold and silver markets. And that raises the possibility of all sorts of money that could be due in damages to at least gold and silver futures traders now.

Now unfortunately, the U.S. Justice Department is seeking to intervene in the antitrust case in New York to delay further discovery and deposition in the case, so that the government could undertake its own investigation of the rigging – which is pretty ironic since the U.S. Commodities Futures Trading Commission (CFTC) for years, was supposedly doing its own investigation of the silver market and kept saying they couldn’t find anything. Now, they want to hold up the civil lawsuit so they (the government) can investigate it. I don’t think that the government really wants to investigate the case at all, I think the U.S. government simply wants to delay any further disclosures that would come from discovery and deposition, because they know that eventually, the rigging investigation proceedings like these are going to lead to the U.S. government’s own participation.

But, anyway, there is now a formal admission by one major international bank, Deutsche Bank, that it helped rig the gold and silver markets, in collusion with other bullion banks. So, that degree of manipulation can’t be denied anymore. The other day, I guess last month, a former Deutsche Bank trader was convicted of a criminal violation for rigging the gold and silver futures markets through what’s called “spoofing,” placing a lot of fake orders that were immediately withdrawn after causing other traders to position themselves in certain ways. So, there’s more and more evidence and more and more documentation of this rigging that’s coming out.

My organization is more interested in evidence of manipulation by governments in central banks, so we’re pretty convinced that the bullion banks that are involved in the instance of litigation were most likely functioning as agents of central banks, and making trades on the market that the central banks wanted made in order to suppress prices controlled, prices. But the litigation has not yet gotten around to incriminating governments and central banks. We’re hoping that will happen eventually.

Mike Gleason: Yeah, certainly if nothing else, the latest developments here with the whole Deutsche Bank case have at least made it known that it’s no longer conspiracy theory, it’s conspiracy fact as we’ve been saying for a while now, and at least now everybody is aware of the fact that yes, the markets are actually being rigged.

Now Chris, people are finding out that the CFTC is simply a joke. GATA exists at least in part because regulators are completely in the hip pockets of those on Wall Street. In fact, we are learning more through Freedom of Information and Wikileaks about why the futures markets for gold and silver were created in the first place.

Our government wanted volatile markets largely to discourage ownership of physical gold and silver. Wikileaks released powerful evidence of that earlier this year. That, and the cozy relationship between regulators and Wall Street explains a lot about why the CFTC could investigate for five years, and somehow miss the fact that banks cheat. We wonder if they were embarrassed when Deutsche Bank admitted to rigging prices while the CFTC investigation took place, turning over 350 pages of documents and some audio recordings to settle a civil suit, helping plans to pursue other banks. So, can we expect regulators to ever do their job, Chris? And if so, can the civil courts hold the bullion banks accountable?

Chris Powell: Well you’ve got to realize, Mike, that what has been happening with gold and silver, the manipulation and the price suppression, is probably completely legal, because the government is doing it. If you go to the U.S. Treasury Department’s internet site and find the page for the Exchange Stabilization Fund – which is an agency of the Treasury Department – you’ll find that the Treasury Department maintains that under the Gold Reserve Act of 1934, as amended, I think, through the 1970s, the Treasury Department, through the Exchange Stabilization Fund, is fully authorized to trade secretly, and manipulate, and rig any market in the world. Not just in the United States, but any market in the world.

I think that, in the end, is why the regulatory agencies have done nothing about the rigging of the gold and silver markets, because it has most likely been done, or most of it most likely has been done at the behest of the U.S. government, which is fully authorized by federal law to rig any market in the world in secret. I’m pretty confident, I mean if I had to bet my life, I would bet my life, that the CFTC knew this when it was investigating the gold market and the silver market, that all signs led back to the government, and the government most likely was using these big investment banks as its agents in manipulating the gold and silver markets, and that the investment banks could just shrug and say, “Hey, we’re only doing this as an agent for the government, and the government is fully authorized to do it, so there’s no violation by us here.”

I’d like to call people’s attention to that. I’m not privy to every trade that is undertaken by an investment bank or a bullion bank on behalf of the government, but I do know that according to documents filed by a CME Group, which operates all of the major futures markets in the United States, documents CME Group has filed with the Securities and Exchange Commission, and has come out of the Futures Trading Commission that CME Group numbers, governments and central banks, has among its clients in-secret trading of all futures contracts in the United States. And not just financial futures contracts, but commodity futures contracts as well. The CME Group offers a volume discount trading program to governments and central banks for trading futures contracts on all CME Group exchanges.

So, we know that governments and central banks are surreptitiously trading all of the major markets in the United States that have futures contracts attached to them. We also know that the gold reserve after 1934 fully authorizes the Exchange Stabilization Fund to rig any market on the planet. I think that’s the direction that financial journalism, if we had any, ought to go in. The CFTC and SEC are powerless here, I think, because the law fully authorizes the U.S. government to rig every market on the planet in secret.

Mike Gleason: And speaking of that, GATA focuses on manipulation in the metals markets, first and foremost, but these days people legitimately wonder if there are any markets that aren’t being rigged in some fashion. I mean, the Federal Reserve has hiked interest rates three times since December. The response in the markets has been a weaker dollar, flat bond yields, and roaring stock markets. Given that the Fed has been tightening, none of these things were expected, but hey, it’s sure working out for Janet Yellen and her comrades at the Fed. They are normalizing rates with none of the negative side effects, it’s almost like magic.

Chris Powell: Yeah, we know that central banks around the world are heavily purchasing various assets… not just government bonds, but they’re also purchasing stocks and derivatives and things like that. We know from the CME Group filings with the CFTC and SEC that governments are secretly trading the futures markets in every respect in the United States. And we know from the filings, the annual reports at the Bank for International Settlements and certain statements by central bankers that governments are surreptitiously trading in the gold market and the gold derivatives market, according to a French central banker, nearly on a daily basis. I think there’s documentation that central banks are openly and surreptitiously trading virtually every market in the world here.

So, yes, certainly, every major market is manipulated, I think there’s whole documentation of that. The problem here, I think, is not so much that any particular market is being manipulated, but rather that the world is losing, or already has lost its free market system. And if you believe as we at GATA do that free markets are a great engine of human progress, then this speaks very poorly about our future. It means we’ve lost the market economy, that we’re transitioning into a totalitarian system.

Mike Gleason: That leads me right into my next question here. Some may be listening to this and might be thinking that it doesn’t matter, or that what these governments and central banks are doing is in the best interest of the people. But speak to that, and discuss more about why it’s in fact harmful, and then who’s getting hurt here by this gold suppression scheme specifically?

Chris Powell: I would argue that really the whole world is getting hurt by the gold price suppression scheme, because gold is a measure of currencies, it’s a measure of asset prices, and if you tamper with the gold price, you’re really tampering with every price, because these prices are related. You’re distorting the whole world’s economy, you’re destroying the market system. Now, I don’t think you can find examples of history where a totalitarian system, over the long term, achieved great economic progress. I think you can find examples in history where market systems produce the greater prosperity and progress.

Well, if we’re losing the market system, we’re losing economic progress, and we’re also losing democracy because people cannot see how prices are being established, they cannot see how power is being allocated in society, and for what purposes? And if you lose the free market system and you lose democracy, I just wonder, what else is there?

Mike Gleason: Isn’t there a limit to how long price suppression can persist though? I mean, if prices are held lower than a free market would cause for years or even decades, it seems, at some point, shortages would crop up, and prices would shoot up. What are your thoughts on this as we begin to close, do you think we are near such a point in time?

Chris Powell: Well yes, theoretically you’re right, but that theory has really developed before the age of derivatives. And now, we have this derivative system where infinite supply, at least infinite paper supply of commodities and financial assets can be created with just a few keystrokes on a computer. Eventually, there will be shortages, but not necessarily in the near future. If people, for example, with gold and silver, if investors in the monetary metals are prepared to accept unbacked paper as equivalent of real metal, then I imagine the gold and silver suppression scheme can go on forever.

If the metal eventually does run out, as it did run out in March 1968 upon the collapse of the London Gold Pool and then again in 1971 when President Nixon took the United States out of the Bretton Woods agreement. You know, governments can just declare force majeure, they can outlaw the private possession in the monetary metals or try to outlaw them. They can impose capital controls, they can impose windfall profits taxes on monetary metals, investors. There’s really no limit to the power of totalitarian governments, or governments that want to engage in totalitarianism.

So I make no prediction as to whether or when this system is going to end. I think it’s just as likely that it’ll grow worse. George Orwell’s vision of the future expressed by one of his characters in his novel 1984 was a boot stomping on a human face forever. I hope that’s not the future that we’re heading for, but I think there’s a chance that is unless people around the world are going to stand up for individual liberty and limited government, and accontable government and free markets.

Mike Gleason: You certainly have to wonder what may happen if we have another financial collapse, and how many people will actually run to the safety of physical gold and silver. Maybe we have a real divergence between the paper market price and the physical price. I think that’s certainly a possibility.

Chris Powell: Well, when that day comes, the metal will not be available to people. If they think that there’s any chance that the monetary metals will ever be fairly valued, I think you’ve got to get your metal now, and maybe it’ll never be fairly valued, and maybe it will. But when the great reset comes, if it does come, it’ll be too late to get your hands on any real metal.

Mike Gleason: Yeah, very well put. Well excellent stuff Chris. I want to thank you for your insights today, and for the work you’re doing there at GATA. Now before we let you go here, can you give our listeners more information on how they can learn more about this and follow what you’re doing there at GATA?

Chris Powell: Sure Mike. We’ve got an internet site, gata.org. We have daily dispatches to our supporters on our mailing list. You can enroll at our internet site to receive our dispatches there. They’re free. If you do care for our work, if you take a look at the documentation we’ve collected on our internet site and the agitation we do, we welcome financial contributions. We are federally-recognized tax-exempt civil rights and educational organization in the United States under Section 501c3 of the U.S. internal revenue code.

So, financial contributions to GATA are not just gratefully accepted, but they are tax deductible, and we really do solicit support from metals investors and people who believe in free markets. The mining industry, the monetary metals mining industry now, is so demoralized. I think it’s really cowardly that we can’t get too much support from them. So individual investors and supporters of free markets are vital to our continuing.

Mike Gleason: Well it’s a very noble cause, we certainly appreciate everything you’re doing there. We’re big fans of those efforts and would love to visit with you again down the road. Thanks very much for your time, and enjoy your weekend Chris.

Chris Powell: Thank you Mike.

 

Gold clobbered by big ETF sales. Silver hit even harder

Gold Today –New York closed Friday at $1,212.40. London opened at $1,207 today. 

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

         The $: € was stronger at $1.1408 after Friday’s $1.1414: €1.

         The Dollar index was stronger at 96.15 after Friday’s 95.98

         The Yen was weaker at 114.21 after Friday’s 113.70:$1. 

         The Yuan was stronger at 6.8034 after Friday’s 6.7990: $1. 

         The Pound Sterling was weaker at $1.2873 after Friday’s $1.2897: £1.

Yuan Gold Fix
Trade Date     Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    7    10

     2017    7    7            

     2017    7    6

SHAU

SHAU

SHAU

/

269.34

270.06

Trading at 267.50

269.52

270.35

$ equivalent 1oz at 0.995 fineness

@    $1: 6.8034

       $1: 6.7990

       $1: 6.8037     

  /

$1,232.15

$1,229.59

Trading at $1,222.94

$1,232.98

$1,230.92

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.]

 As you can see Shanghai has not dropped as far as New York or London. The price differential is very wide now on today’s price of $15.94 between Shanghai and London. We have no doubt that today gold, from the SPDR [GLD} is flowing across to Shanghai via HSBC the Custodian of the gold ETF.

The big question is will Shanghai pull up London and New York prices or will Shanghai be pulled down to a much narrower differential? At the moment it is New York and London that are pulling prices down, but at the cost of gold flowing eastwards.

Silver Today –Silver closed at $15.56 Friday after $16.01 at New York’s close Thursday.

LBMA price setting:  The LBMA gold price was set today at $1,207.55 from Friday’s $1,220.40.  The gold price in the euro was set at €1,069.40 after Friday’s €1.075.13.

Ahead of the opening of New York the gold price was trading at $1,212.75 and in the euro at €1,065.03. At the same time, the silver price was trading at $15.40. 

Price Drivers

The gold price breakdown on the Technical front is now being seen in their prices. Today, the gold price is holding just above $1,200 and the silver price tumbled over $1.23 in the last three business days. Where to now? It has taken around 27 tonnes of sales from the SPDR gold ETF over the last two weeks, with virtually no purchases to cause the breakdown in the gold price.

The G-20 meeting on Friday was the most dramatic one we have seen for over a decade. Instead of coming out with the usual platitudes, this one came out with divisions between the U.S. and the other major blocs, China and the E.U. There is a clear distance building up between the E.U. and the U.S. So much so that the euro could rise to $1.20 by year’s end. The E.U. has solidified a Free Trade Agreement between each other. The G-20 agreed to fight Protectionism but the U.S. was not included in that agreement.

As we have pointed out exchange rates will be affected. We would go so far as to say that an E.U. – China trade agreement would be conducted either in Euros or Yuan or both. The increasing path to isolation that appears to be being followed now will impact the dollar and heavily. We see the result of the G-20 meeting as being the entrance to a full blown multi-currency system. This is extremely positive for gold at all levels.

Gold ETFs – Yesterday saw sales of 5.324 tonnes from the SPDR gold ETF (GLD) but no change in the Gold Trust (IAU) holdings. The SPDR gold ETF and Gold Trust holdings are at 835.345 tonnes and at 210.76 tonnes respectively.

This was a hefty sale and follows two earlier sales last week of a similar size. Combine these sales with the 12 tonne sale the week before and the physical downward pressure was too much to hold the gold price above the “Golden Cross”.

Since January 4th 2016, 196.206 tonnes of gold have been added to the SPDR gold ETF and to the Gold Trust.  Since January 6th 2017 33.691 tonnes have been added to the SPDR gold ETF and the Gold Trust.

Julian D.W. Phillips 

 GoldForecaster.com | StockBridge Management Alliance 

 

Gold and Silver slump after NY open

 Gold Today –New York closed yesterday at $1,224.70. London opened at $1,221.65 today. 

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

         The $: € was weaker at $1.1414 after yesterday’s $1.1353: €1.

         The Dollar index was weaker at 95.98 after yesterday’s 96.22

         The Yen was weaker at 113.70 after yesterday’s 113.33:$1. 

         The Yuan was stronger at 6.7990 after yesterday’s 6.8037: $1. 

         The Pound Sterling was weaker at $1.2897 after yesterday’s $1.2935: £1.

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

     2017    7    6            

     2017    7    5

SHAU

SHAU

SHAU

/

270.06

270.51

Trading at 270.50

270.35

270.00

$ equivalent 1oz at 0.995 fineness

@    $1: 6.7990

       $1: 6.8037

       $1: 6.7988     

  /

$1,229.59

$1,232.54

Trading at $1,232.46

$1,230.92

$1,230.21

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.]

 Shanghai is stabilizing again today, but not by much. New York traded at $6 lower than Shanghai following Shanghai’s close yesterday. Today London opened $11 lower than Shanghai. Until gold makes a firm break one way or another we consider it directionless as it has been for most of the second quarter.

Today, once again, remains a critical day for the gold price in all three global centers as the direction forward is still to be established.

Silver Today –Silver closed at $16.01 yesterday after $16.03 at New York’s close Wednesday. The silver price has formed a double bottom, but, while a double bottom remains in place, traders are trying to push it down. It is refusing to go down and keeps turning back to $16.00. The way forward remains uncertain!

LBMA price setting:  The LBMA gold price was set today at $1,220.40 from yesterday’s $1,224.30.  The gold price in the euro was set at €1,069.40 after yesterday’s €1.075.13.

Ahead of the opening of New York the gold price was trading at $1,223.45 and in the euro at €1,065.26. At the same time, the silver price was trading at $15.91. 

Price Drivers

The gold and silver prices have us all on tenterhooks while their direction forwards remains to be confirmed. While some believe that rate tightening will still happen and stimuli be dropped by the main developed world central banks, the date, while so far slightly encouraging could well disappoint and the tightening direction postponed. So global financial uncertainty remains a concern in the developed world in particular.

While the jobs numbers were encouraging at 222,000 wages stayed flat, adding to concerns that inflation is just not rising, a major worry of the Fed. The dollar weakened immediately after that.

What is now constantly overlooked in the financial world is that it is governments that bear the prime responsibility for economic growth, but since the financial crisis of 2008 they have either been unable to promote it or found the political gridlock has prevented them from doing so. The burden has fallen unfairly but squarely on the back of their central banks equipped only with blunt tools to do the job. That’s why today we see so much importance placed on data [past not present] that will influence central bank’s decisions. At times our focus is pushed onto too few factors and too intensely for us to have the balanced perspective on what is likely to happen, in the near future. This adds to the risks facing the developed world economies.

Today, Friday is usually the busiest day of the week because any positions held become not just a one day risk but a three day risk. So we may see some important moves made today after the long move sideways, then a fall to current levels not far short of $1,200. As we said yesterday, both the gold and silver prices are at critical points on the Technical scene. Following the New York open both gold and silver slumped suggesting the precious metals bears are currently in the driving seat.

Gold ETFs

Yesterday saw no sales or purchases from or into the SPDR gold ETF but a purchase of o.45 of a tonne into the Gold Trust. The SPDR gold ETF and Gold Trust holdings are at 840.669 tonnes and at 210.76 tonnes respectively.

 Julian D.W. Phillips 

 GoldForecaster.com | StockBridge Management Alliance