Indian gold demand coming back on line as Chinese SGE gold ‘fix’ imminent

Gold TodayGold closed in New York at $1,256.10 down from $1,257.40 on Tuesday. On Wednesday morning in Asia, it fell back and continued to fall in London as the dollar strengthened. London saw the LBMA price setting at $1,245.75 down from $1,259.20 on Tuesday.

The dollar index is higher at 94.60 up from 93.84 on Tuesday. The dollar is stronger against the euro at $1.1309 up from $1.1419 yesterday.

The gold price in the euro was set at €1,101.56 down from €1,102.72 Tuesday.

Ahead of New York’s opening, the gold price was trading at $1,246.75 and in the euro at €1,102.05.  

Silver Today –The silver price closed in New York at $16.21 up from $15.90 on Tuesday. Ahead of New York’s opening the silver price stood at $16.13.

Price Drivers

Today sees the euro weaken and the dollar index rise as you can see above. The market is being moved by exchange rate moves, as physical demand in the U.S. is negative and, on balance, ETF shareholders were sellers of small amounts yesterday.

Reports of the leading U.S. institutions turning bullish on gold continue across the board targeting as much as $1,500.  The prime driver they record is the Technical picture. We do not argue with that, but add that there are several other factors that will contribute to the rise in the price of gold. Renewed Indian demand and next week’s Yuan gold Fix will be among those adding to the bullish tone of the market.

India – After 43 days of strikes which have produced nothing but losses for the jewelers the strike is off. Now we will see ‘official’ imports begin to flow again, into the country. These ‘official’ supplies flow through London to India. They will affect the London and New York gold prices.

It is always difficult to state India’s imports with any accuracy because of smuggling. And by their very nature, tonnages smuggled into the country cannot be accurately measured. But behind closed doors jewelers have continued production.

We see the 1% duty imposition as a side issue. The main issue is that all jewelers must now report their activities to the bureaucrats of the government. Until now, their activities have gone unreported. But the Indian ‘cash culture’ will ensure that the figures reported may well not reflect the true picture.

China & the Fix – Taken in isolation next week’s start of the Yuan Fix in Shanghai may well not have an immediate impact on the global gold price. Time will be needed for the system to settle in. But taken with the other moves made by China to influence the global gold price and we may well be on the brink of a very different gold market from now on.

Gold ETFs – We saw sales of 2.675 tonnes of gold from the SPDR gold ETF but a purchase of 0.48 of a tonne into the Gold Trust on Tuesday. This leaves their holdings at 815.138 and 188.04 tonnes in the SPDR & Gold Trust respectively.  This did not affect the gold price, which is reacting to currency moves.

Silver – The silver price is running full pelt ahead of gold only to pause when gold slips then runs again when it begins to rise.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

 

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