Yuan ‘fix’ will make gold less prone to bear raids

New York closed yesterday with the gold price at $1,119.70 up from $1,105.50. Gold then rose in Asia to $1,121.00. In the euro this was €991.16 up €11.11.  This morning the dollar index started the day at 95.26, slightly lower than the 95.59 of yesterday. The LBMA gold price was set at $1,118.15 up $8.40 from yesterday. The euro equivalent was €988.29 down by €0.31. Ahead of New York’s opening gold was trading at $1,117.55 and in the euro at €987.37.  

The silver price closed at $14.91 up 48 cents on yesterday in New York. Ahead of New York’s opening silver was trading at $14.85.

Price Drivers

Yesterday’s rise was not the strong move we are waiting for as it is within the trading range we expected to see for the gold price.

Today, we see the Fed pull the trigger on the direction of all global financial markets, something the besieged Ms Yellen is not happy about at all. Despite all the Fed’s efforts to remove the potential volatility after today’s statements, we expect to see markets volatile whatever she says. The markets are pointing to a 30% chance of a rate rise only. The data, to which Janet Yellen points to as her guide, is not sufficiently strong for a rate hike to be absorbed easily.

Meanwhile, until she speaks no market is making significant moves. Likewise, there were no dealings in the SPDR gold ETF or the Gold Trust yesterday. This again leaves the holdings of the SPDR gold ETF at 678.183 tonnes and 159.90 tonnes in the Gold Trust.

Over in China the financial authorities are going to regulate and considerably reduce High Frequency Trading, a practice that appears to be being blamed for the disruptive volatility and is deemed unfairly destructive to values. We have no doubt that this will also cover the Shanghai Gold Exchange.

Once the Yuan “Fix” is established, which we believe is soon, Yuan gold prices will be less prone to bear raids. We find it hard to believe that China will follow COMEX prices, as London does now. It is more likely that COMEX will follow the Chinese gold prices, particularly if arbitraging gold between the two markets is made efficient!

Silver– Silver jumped nearly 3% yesterday against gold’s 1% showing the potential price performance of silver later.

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

 

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