Gold attacks $1,300 again but falls back. Big purchase into GLD

Gold TodayGold closed in New York at $1,290.00 up from $1,268.10 on Thursday. On Monday morning in Asia it rose to $1,300.00, as the dollar weakened heavily and before the LBMA price setting in London.

LBMA price setting:  $1,296.50 up from Friday’s $1,274.50.

Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
2016  05  3

2016  04  29

SHAU

SHAU

269.80

265.25

269.06

265.54

Dollar equivalent @ $1: 6.4804

$1: 6.4798

$1,294.94

$1,270.77

$1,291.39

$1,272.11

The Shanghai Gold Fixings today again show a real rise in the price of physical gold as the number of the Yuan in dollars rose [weakened]. But a significant weakening of the dollar helped the gold price rise to $1,300. The rise in the gold price held in London ahead of the LBMA gold price setting.

Once again the gold price has highlighted the strength of gold in all currencies. It also highlighted the weakness of the dollar and helped investors to see more clearly the impact of increased physical demand for gold as well as just how much currency weakness is reflected in the dollar gold price.

The dollar index is lower today, at 92.50 down from Friday’s 93.88. The dollar is weaker against the euro at $1.1552 from Friday’s $1.1400.

The gold price in the euro was set at €1,122.32 up from Friday’s €1,118.18.

Ahead of New York’s opening, the gold price was trading at $1,297.30 and in the euro at €1,123.00.  But after New York opened it failed to hold the $1,290 level

Silver Today –The silver price closed in New York on Friday lower at $17.51 down from Thursday’s $17.60. Ahead of New York’s opening the silver price stood at $17.58, but along with gold retreated after New York opened.

Price Drivers

Once again, we have seen gold rise in all currencies, but in particular in the significant weakening of the U.S. dollar and continuing demand for physical gold globally. The Technical picture for both gold and silver continues to look positive. The gold price will fight a battle with stale bulls around $1,300, but this may not be a long battle.

Quite rightly, Mario Draghi of the E.C.B. scolded Germany’s passing the blame for poor treatment of savers in Germany on low interest rates coming out of the ECB. He stated that long overdue structural reforms need to be taken to release pent-up growth in Germany. In other words he said the finger pointed at the E.C.B. has three fingers pointed back at the German government. With the dollar falling against the euro, growth in the E.U. will weaken as its competitive devaluation is stymied. After 8 years of relative inaction on reforms, now is the time to act. But will they?

But we cannot ‘blame’ an individual factor for lack of growth. The wave of deflation sweeping across the world is catching all nations. We are watching, not a battle to increase inflation [which is rising] but a battle to stave off deflation. Close to zero growth is testament to the progress in that battle.

The nation fighting the hardest battle is Japan. While it is expected to soon intervene in the currency market to weaken the Yen, the agreement of the G-20 not to manipulate currencies seems to have gone by the wayside. It is negated by the concept that the agreement holds, provided it does not cause a weakening of international trade advantages. The Yen has swung from 76 to the dollar to 122 to the dollar and now is strengthening through 108 to the dollar.

With growth in China around 6% we have to note that such growth is the equivalent of adding the entire GDP of Belgium annually to the Chinese economy. Such levels have to drop as the Chinese economy grows.

Gold ETFs – Friday saw huge purchases of 20.803 tonnes of gold into the SPDR gold ETF and 0.75 of a tonne into the Gold Trust. This leaves their holdings at 824.943 and 188.31 tonnes in the SPDR & Gold Trust, respectively.  

This is the largest purchase we have seen into the SPDR gold ETF since the 18 tonne purchase when gold was at $1150 the turning point for gold to the uptrend.

Silver – The Silver price has been marking time while gold rose over the weekend, so we expect to see a ‘shunt’ effect on the silver price today.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

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