Prospects for gold and silver brightening by the day

Gold TodayGold closed in New York at $1,273.70 up from Thursday’s $1,268.50. On Monday morning in Asia it rose to $1,280, as the Yuan slipped further against the dollar, before the LBMA price setting in London.

LBMA price setting:  $1,281.00 up from Friday’s $1,275.15.

Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
2016  05  16

2016  04  13

SHAU

SHAU

268.68

266.05

269.39

267.51

Dollar equivalent @ $1: 6.5492

+$1: 6.5407

$1,276.02

$1,265.17

$1,279.39

$1,272.11

Once again, Shanghai led the way higher after a lower New York close. The Gold Fixing in Shanghai’s morning was $2.32 higher than New York’s close but again rose at the afternoon Fix to a price close to London’s morning LBMA price setting.

The gold price is still in a tight trading range and still dominated by exchange rates. It remains at a point where a strong move will take place, but whether it is today or later this week remains to be seen.

The dollar index is almost unchanged at 94.53 up from Friday’s 94.33. The dollar is also slightly stronger against the euro at $1.1325 up from Friday’s $1.1348.

The gold price in the euro was set at €1,131.13 up from Friday’s €1,123.68.

Ahead of New York’s opening, the gold price was trading at $1,286.40  and in the euro at €1,135.22.  

Silver Today –The silver price closed in New York on Friday at $17.10 lower than Thursday’s $17.07. Ahead of New York’s opening the silver price stood at $17.33.

Price Drivers

The drivers of the gold and silver markets are primarily exchange rates, which are currently moving against a backdrop of waning global growth. Since 2008 the prime engines trying to bring about a recovery have been central banks using monetary policies. These have produced limited results that, to us, are in the process of losing effectiveness. Their efforts are to be commended particularly considering they were not designed to do the job, just support government when they did the job. But the track record of governments, whether it is the U.S., E.U. or Japan is very poor. Consequently, after 8 years since the credit crunch, recoveries are weak, debt levels higher than in 2008 and prospects for the global economy are uncertain. All of this synthesizes in the monetary system which is in the process of changing to a multi currency system from dollar hegemony. The ruptures these will cause are close now but have yet to be felt fully.

These are the reasons why the prospects for gold and silver are brightening by the day and why institutional investors of note are lauding gold’s qualities. The uptrend in gold and silver has started, but has yet to move into second gear. We are close to that happening now.

Gold ETFs – Friday saw purchases of 5.943 tonnes of gold bought into the SPDR gold ETF and 0.6 of a tonne into the Gold Trust. This leaves their holdings at 851.132 and 198.38 tonnes in the SPDR & Gold Trust, respectively.  

This was a substantial purchase and one that should have moved the gold price more. It was recognized in Shanghai where gold prices did rise. The continuous buying of the shares of gold ETFs this year is significant and starting to be recognized by the large institutions, who are now joining the view that gold has moved to the uptrend after nearly three years of low prices.

Silver – Repeat: The Silver price continues stable and keen to move behind the gold price.

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