On Wednesday New York closed at $1,085.00 down $3.20. The dollar is slightly weaker at $1.0901 down from $1.0860, with the dollar Index weaker at 97.90 down from 98.12. This morning the LBMA gold price was set at $1,085.00 down from $1,086.50. The euro equivalent was €995.32. Ahead of New York’s opening, gold was trading in London above $1,085.60 and in the euro at €995.69.
The silver price closed at $14.60 up 1 cent in New York. Ahead of New York’s opening it was trading at $14.58.
There were sales of 4.769 tonnes from the SPDR gold ETF but none from the Gold Trust on Wednesday. The holdings of the SPDR gold ETF are at 667.934 tonnes and 162.58 tonnes in the Gold Trust. Once again this did not hit the gold price, while yesterday’s slightly stronger dollar moved it down slightly. In China, the gold price continued to move with the developed world’s price of gold. This again tells us that significant tonnages sold from the SPDR gold ETF are being taken off the market easily.
This is important because it shows that the arbitrage trade between New York/London and Shanghai is coping with U.S. outflows of gold keeping the gold price moving relative to currencies, which it should be doing. The result should be:
- The eventual removal of the premium over London’s gold price in Shanghai as the market price becomes global.
- In turn this lowers the power of local speculation that increases volatility, enormously.
- It also reinforces the pricing power of physical gold markets over paper ones. Banks in the gold trade such as HSBC are finding it easier to ‘lay-off’ risk in China lowering its own exposure to such risks.
- It should allow underlying trends in the gold market to show through over and above the huge speculative interests in the market, as eastern and western markets come together in a more integrated fashion.
This can only be healthy for the gold market and its structure. It will take some time for the above features to be soundly established in the gold market. The rest of 2015 with its new and old gold events will test these thoughts thoroughly.