Gold priced by the weak Yuan, silver retreats

Gold TodayGold closed in New York at $1,287.10 yesterday down from $1,290.00 on Friday. On Wednesday morning in Asia it pulled back to $1,281.00, as the Yuan weakened against a slightly stronger dollar, before the LBMA price setting in London.

LBMA price setting:  $1,280.30 down from Tuesday’s $1,296.50.

Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
2016  05  4

2016  04  3

SHAU

SHAU

267.79

269.80

268.02

269.06

Dollar equivalent @ $1: 6.5077

$1: 6.4804

$1,279.90

$1,294.94

$1,281.00

$1,291.39

The Shanghai Gold Fixings today showed only a small change in the Yuan gold price as one would have expected.

Why the fall in dollar terms? You will see the value of the Yuan against the U.S. dollar fell 0.25 of a Yuan.  This made all the difference, as it reflected a slightly strengthening dollar or a weakening Yuan, at a time when most other currencies continued strong, overall, against the dollar.

For those following the Technical picture, this is confusing because you are not following just the gold price any more, but the gold price in dollars. The Technical picture of gold in the Yuan is now very different. So is the Technical picture defining the dollar’s moves against gold or gold against the dollar? The same applies to all other currencies where the Technical picture is different.

Please note that China has been keeping the Yuan stable against the dollar recently, while it weakened against all currencies, but now it seems that China is not averse to weakening the Yuan against the dollar [and more against all other currencies]. As reflected in the gold price in the two currencies the gold price is now moving with the Yuan.

The dollar index is higher today, at 93.25 up from Tuesday’s 92.50. The dollar is stronger against the euro at $1.1475 from Tuesday’s $1.1552.

The gold price in the euro was set at €1,115.73 up from Tuesday’s €1,122.32.

Ahead of New York’s opening, the gold price was trading at $1,275.65 and in the euro at €1,111.68.  

Silver Today –The silver price closed in New York on Tuesday lower at $17.43 down 8 cents from Monday’s $17.51. Ahead of New York’s opening the silver price stood at $17.19.

Price Drivers

The influence of exchange rates is now clearly apparent. The gold price in the euro and the dollar has fallen but was relatively stable in the Yuan. This tells us the Yuan price of gold is dominant today. We need to see if this is so in the next days and weeks before we can be conclusive about this, but that is today’s picture.

We would have thought that yesterday’s 20 tonne purchase into GLD would have had a greater impact on the gold price in dollars, but exchange rates are the dominant factor in the gold price today.

Gold ETFs – Tuesday saw no purchases of gold into the SPDR gold ETF but saw a relatively large amount bought into the Gold Trust of 3.01 tonnes. This leaves their holdings at 824.943 and 191.31 tonnes in the SPDR & Gold Trust, respectively.  

While the Gold Trust purchase was a significant amount for the Gold Trust to see, it was not sufficient to overcome the influence of exchange rates, the Yuan dollar rate in particular.

Silver – The Silver price has retreated strongly , but may well rise much faster as soon as gold recovers and then we expect to see a ‘shunt’ effect on the silver price.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

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