Enormous impact of ICBC’s Barclays London gold vault purchase

Gold TodayGold closed in New York at $1,274.40 on Monday up from Friday’s $1,273.70. On Tuesday morning in Asia it held at $1,275, as most exchange rates were close to yesterday’s levels.

LBMA price setting:  $1,270.10 down from Friday’s $1,281.00.

Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
2016  05  17

2016  04  16

SHAU

SHAU

268.64

268.68

267.85

269.39

Dollar equivalent @ $1: 6.5475

+$1: 6.5492

$1,276.16

$1,276.02

$1,272.40

$1,279.39

Yesterday and today saw global gold markets moving closely together. A glance across the currency world as well as the gold world shows a tightening of the trading range of currencies and the continued consolidation of gold. We are seeing a sideways movement in prices ahead of a very strong move, soon.

The dollar index is almost unchanged at 94.54 barely changed from yesterday’s 94.53. The dollar is also slightly stronger against the euro at $1.1323 again barely changed from Monday’s $1.1325.

The gold price in the euro was set at €1,121.70 down from Monday’s €1,131.13.

Ahead of New York’s opening, the gold price was trading at $1,273.05 and in the euro at €1,124.70.  

Silver Today –The silver price closed in New York on Monday at $17.14 higher than Friday’s $17.10. Ahead of New York’s opening the silver price stood at $17.09.

Price Drivers

In what would seem to be the most remarkable piece of news to hit the gold market since the start of the Shanghai Gold Fix: After buying the Deutsche Bank lease to their 1,500 tonne gold vault China’s ICBC has now bought the Barclays gold vault in London. We can’t properly cover the full impact of this news in this daily report, but do so in our newsletters. But think about it. The 1,500 tonne capacity Deutsche Bank vault was not enough. The Barclays vault has a capacity of 2,000 tonnes. The total 3,500 tonnes capacity represented by the two vaults is around the size of Italy’s, Germany’s, France’s gold reserves. It is just under half of the gold reserves of the U.S.A., of over 8,000 tonnes, which accounts for over 70% of the U.S. foreign exchange and gold reserves. It’s massive in the context of the gold world. We have written on this before in our newsletters but will now add a clear picture of what we see lying ahead, in the next issues.

A question we would like the answer to is, “What volume of client gold are they now managing and what plans do they have for their own holdings in London?” The existing client’s gold stored in the vaults will not be affected and we doubt the service will. But they are in a position to be the dealer for these clients and will act accordingly. This confirms their market-making role. But it also describes their increasing control over the London gold market.

What is for sure is that any investor in gold and silver badly needs to understand the Shanghai Gold Exchange and Chinese gold markets if they want to understand the gold market.

It is no longer about COMEX’ views on the U.S. economic scene!

Gold ETFs – Monday saw purchases of no purchases or sales of gold bought into the SPDR gold ETF or the Gold Trust. This leaves their holdings at 851.132 and 198.38 tonnes in the SPDR & Gold Trust, respectively.  

With the absence of more gold purchases into the gold ETFs the market pulled prices back. Perhaps dealers were marking prices higher in anticipation of more buying, but, because it didn’t come, prices are tight and prepared for sellers or buyers.

As an aside, HSBC has a global footprint, but was originally the Hong Kong and Shanghai Banking Corporation. Its restructuring plans and action to date is to have a more Asian focus. HSBC is the custodian of the SPDR gold ETF holding its gold. The influence of China in the gold world is becoming dominant.

Silver –The Silver price continues to hold over $17.00 waiting for gold to move.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

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