Brexit seen as more likely.  Fed worried.  Gold and silver on the rise 

Gold Today –Gold closed in New York at $1,294.30 up $9 on Wednesday rose strongly in Shanghai to $1,306 before rising again at London’s opening.

The $: € moved lower to $1.1260 from yesterday’s $1.1228 overnight. The dollar index moved to 94.48 down from 94.78.

Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
2016  06  16

2016  06  15

SHAU

SHAU

275.16

272.75

277.07

273.14

Dollar equivalent @ $1: 6.5982

$1: 6.5967

  $1,297.09

$1,286.02

$1,306.09

$1,287.86

Shanghai led the way again, after New York closed, taking the price higher to be followed by London taking it higher still, where the gold price barged through overhead resistance and the psychological resistance at $1,300 and hit $1,310. We see this, in part, as HSBC buying in London to supply  yesteradya’s SPDR gold ETF demand as well as Chinese investors rushing into gold.

For supplies to be this tight in London tells us that the improvement in the technical picture was reinforced by the supply/demand position in London as U.S. demand continues to burgeon.

We note from Shanghai’s performance, that demand in London or New York cannot be met in China, as no gold exports are allowed from there. Hence Shanghai is untouched by any supply squeeze in the developed world.

Only the Chinese bank ICBC could relieve such demand from its London stocks. But its task, while it is to provide gold to the market as a ‘market maker’ it is not bound to keep the London market ‘in balance’ from its stocks. But it is tasked by China to supply gold to China too. Consequently, it is entirely proper to provide balance in the Chinese gold market, not London. This means that the ICBC will send the gold not needed to be a market maker in London, to China to meet that demand.

Global financial markets are appearing to be discounting an exit of the U.K. from the E.U. and the consequential turmoil now expected. Next week may well prove a ‘watershed’ week for the financial world. If the U.K. votes to stay in the E.U. it will be a damp squid, but if not it may well prove to be ‘the event’ that triggers disruptions that will benefit gold and silver tremendously.

LBMA price setting:  $1,307.00 up from Wednesday 15th June’s $1,282.00.

The gold price in the euro was set at €1,164.37 up from Wednesday’s €1,141.79.

Ahead of New York’s opening, the gold price was trading at $1,305.50 and in the euro at €1,168.44.

Silver Today –The silver price closed in New York on Tuesday at $17.54, up from Tuesday’s $17.38 a rise of 16 cents. Ahead of New York’s opening the silver price stood at $17.71.

Price Drivers

Not only did the Fed hold rates at current levels, it did warn of game changing events such as Brexit, that could affect U.S. growth and the dollar. It stated that while jobs growth was slowing, economic growth was rising. After Janet Yellen’s statement the gold price jumped to over $1,294 in line with more buying into the SPDR gold ETF.

The next event, overnight, to affect markets was the Bank of Japan’s Kuroda confirmation that it would do nothing more to stimulate Japan’s economy. At this point the global markets reacted by falling. It was not just in Japan, it was across the world, why?

We see this as a signal that Japanese monetary stimulation is not succeeding, confirmed by a stronger Yen, now trading at 104.26 to the U.S. dollar. Falling equity markets around the world tell another story. While they are the remaining source of decent yields and likely to stay that way, prospects for global growth are slowing and now affecting global equities, which are either ‘toppy’ or beginning to fall. In other words, the dark clouds that we have been seeing on the horizon are moving above us. What next? Brexit is next, next Thursday with results seen later that day.

Gold ETFs – On Wednesday the holdings of the SPDR gold ETF(GLD) & Gold Trust(IAU) rose another 2.14 tonnes as more bullion was purchased into the gold ETF, leaving its holdings at 900.75. 0.75 of a tonne of gold bullion was added to the Gold Trust, leaving its holding at 197.65 tonnes.

Since January 4th this year, the holdings of these two gold ETFs have risen 301.632 tonnes. This could prove more that the central banks disclose they bought over 2016. With the distinct possibility of Brexit ahead we could see this total leap over the rest of the year.

Silver –Silver is going at full pelt now and should continue to do so in the weeks ahead.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

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