London and NY gold prices don’t represent true demand and supply

On Friday New York closed at $1,122.10 down $3.30. The dollar was weaker at $1.1162 down from $1.1142 at the close, against the euro, with the dollar Index slightly weaker at 96.28 down from 96.34. Today the LBMA gold price was set at $1,121.00 down $4.00 from Friday. The euro equivalent was €1,004.21 down €5.80. At 12.00 hrs London time, gold was trading at $1,121.00 and in the euro at €1,005.52.  

The silver price closed at $14.58 down 11 cents in New York. At 12.00 hrs London time today it was trading at $14.53.

On Thursday and Friday China was closed. Today, because of Labor day New York is closed, but London remains open. The gold price remains at the mid-point of the current consolidation pattern.

Demand as reported by the Shanghai Gold Exchange is far ahead of the record 2013 demand levels to date. As we reported last week, add this to Indian demand and there is nothing left for the rest of the world, and yet London and New York are taking prices lower and currently holding them there.

What does surprise us is the continual supply to London and New York, when other parts of the world are seeing this record demand. Likewise we are surprised that gold sold on contract to buyers continues to use London or New York prices when clearly they don’t represent true demand and supply. We do understand how buyers are happy to uses those prices as they are way below what true demand and supply imply. At this stage there appears little choice for suppliers but to accept London and New York’s prices.

With the Yuan “Fix” coming before the end of the year an alternative to London and New York prices may well appear. Certainly, suppliers may well turn from supplying through London and New York to doing so through Shanghai.

Nevertheless, the key question remains, “When will Asian demand force prices higher?”

There were sales of 0.241 of a tonne from the SPDR gold ETF and o.37 from the Gold Trust, on Friday. This leaves the holdings of the SPDR gold ETF at 682.354 tonnes and 160.77 tonnes in the Gold Trust. This was confirmation that the recent bear raids have halted, as these amounts, while having a discernible impact on the gold price [because of China’s closure Thursday and Friday], did not represent substantial sales.

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

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