China wants healthy gold market. Is it intervening?

On Monday New York closed at $1,094 down $6. The dollar was almost unchanged at $1.1062, with the dollar Index slightly higher at 96.77 from 96.72. This morning the LBMA gold price was set at $1,095.60.  The euro equivalent was €990.60 down from €992.50 yesterday. Ahead of New York’s opening, gold was trading in London at $1,092.60 and in the euro at €990.57.

The silver price closed at $14.56 down 13 cents in New York. Ahead of New York’s opening it was trading at $14.61.

The ‘bear raid’ is either finished or pausing today, as no gold was sold from the SPDR gold ETF or the Gold Trust yesterday. As we have said many times before, Asia does not chase prices, but in the developed world there have never been so many short positions and a dearth of longs in COMEX.

The holdings of the SPDR gold ETF are at 680.154 tonnes and 163.85 tonnes in the Gold Trust.  Meanwhile dealers are moving prices in line with the moves of the euro against the dollar.

What did happen in China in the last day was the equity market plunged 8% despite the measures put in place by the government there. In the West the acceptance of the separation of the financial system from the political system is taken for granted, but in China the government controls everything. The financial system is controlled through the People’s Bank of China including the Shanghai Gold Exchange.

With the government there nurturing the financial system to maturity, such collapses or bear raids are taken as an attack on government as well. This is particularly so now that the government has been extremely high profile in trying to protect the equity market from further falls. These have failed to prevent further falls.  We expect measures to attempt to halt further falls in the equity market and by extension perhaps the gold price?

It is more than likely that an agent of the PBoC is taking off any dumped gold from New York and sold down in Shanghai [seen at the opening in the SGE] which appears to have happened this week. We need at least the rest of this week to see if this is really happening. Bear in mind China wants healthy financial and gold markets because they have visibly encouraged ownership of gold, so they will ensure the Yuan gold price will not go the way of the equity market.

Julian D.W. Phillips for the Gold & Silver Forecasters – www.goldforecaster.com and www.silverforecaster.com

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