Yuan Gold Fix arrives!  Not rocking the boat so far!

Gold TodayGold closed in New York at $1,234.00 up slightly from $1,233.90 on Monday. On Tuesday morning in Asia, it picked up and rose to $1,243 before London pulled it back slightly to $1,241 before it was set at $1,241.70 at the LBMA price setting, up from $1,237.70 on Monday.

The dollar index is lower at 94.18 down from 94.60 on Monday. The dollar is weaker against the euro at $1.1350 down from $1.1208 Monday.

The gold price in the euro was set at €1,092.60 up from €1,094.53 Monday.

Yuan Gold Fix

The Shanghai Gold Exchange set the price at 256.92 Yuan a gram ($1,234.05 an ounce) at the 10:30 a.m. session after members of the exchange submitted buy and sell orders for metal of 99.99% purity. You will find a $2 or $3 variation dependent on what exchange rate you use and if you use the bid or ask sides of the exchange rate.

To get the price in dollars, one will have to take the SGE gold price and divide it by 32.1507465 x 1,000 to get a price per ounce in Yuan. Then divide this price by the $: Yuan exchange rate at the time of the Fix. E.g. 256.92 / 32.1507465 x 1,000 /6.4746 = $1,234.22.   

Members include Chinese banks, jewelers, miners and the local units of Standard Chartered Plc and Australia & New Zealand Banking Group Ltd.

It is convincing that the first Shanghai Gold Fix was in line with the London prices. We do expect divergences in time, but for now both are on the same page. We have no doubt that when these divergences appear, they will be because China decides they will.

Ahead of New York’s opening, the gold price was trading at $1,249.00 and in the euro at €1,100.03.  

Silver Today –The silver price closed in New York unchanged at $16.23 on Monday. Ahead of New York’s opening the silver price stood at $16.88.

Price Drivers

The gold price was barely moving outside of the Fixes. In all currencies it is now rising, so the strong move may have started?

The earnings season in the U.S. shows margins dropping [in the banks too] as turnover starts to shrink. This does not support even 2 rate hikes from the Fed and places more stimuli and lower rates back on the table as a possibility.

The global economy is seeing slower growth too. In the E.U. the lack of consensus on growth among the member states leave the E.U. emasculated on giving growth a boost through fiscal stimuli. Likewise, in the U.S. a ‘hung’ Congress denies the U.S. fiscal stimuli at the right levels, namely the re-invigoration of infrastructure, which has decayed seriously in the last 20 years.

Until these political issues are truly sorted out [unlikely] the threat of recessions on both sides of the Atlantic remain possibilities. This will prove supportive of gold and silver as we move into a multi-currency system.

Gold ETFs – There were no sales or purchases into or out of the SPDR gold ETF or the Gold Trust on Monday. This leaves their holdings at 812.462 and 188.04 tonnes in the SPDR & Gold Trust respectively.  

Silver – The silver price is running full pelt once more, as gold looks as though it is ready to make a strong move. The silver price is reading this higher by rising 2%+ yesterday. We believe the moves are coming from retail investors believing that the gold: silver ratio is out of whack. What is for sure is that the ‘day of the precious metals’ is drawing near.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

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