BoE disappoints. Gold and silver fall back. Pound rises.

Gold TodayGold closed in New York at $1,332.20 on Wednesday after Tuesday’s close at $1,332.20.  In Asia the gold price tried to rally as you can see below  

  • The $: € fell to $1.1096 up from $1.1151.
  • The dollar index fell to 96.32 from 96.53 Wednesday.
  • The Yen was weaker at 105.44 from Wednesday’s 104.32 against the dollar.
  • The Yuan was slightly weaker at 6.6855 from 6.6845 Wednesday.
  • The Pound Sterling was initially weaker at $1.3225 down from Wednesday’s $1.3271 waiting for Governor Carney’s expected easing of the B. of E. interest rates.  A hope that was dashed with a no change decision leading to a pick up to the $1.3400 level before easing back again.

Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
2016  07  14

2016  07  13

SHAU

SHAU

288.94

286.90

287.60

288.16

Dollar equivalent @ $1: 6.6855

$1: 6.6845

$1,344.26

$1,334.97

$1,338.02

$1,340.83

The Chinese gold market was not convinced by the fall in New York and lifted the gold price, reflecting internal Chinese demand. After the close and ahead of London’s opening the gold price was ‘marked down’ pretty heavily and after the LBMA price setting was trading at $1,326.65. No doubt, if Shanghai prices remain higher, its banks in London will move physical gold from their London bases to Shanghai to arbitrage prices and shift more bullion into China.

The attempt to break the gold price down further in New York with no physical sales is a risky mark down of prices as the Technical picture degenerated and pointed down. The bears who have engineered this break down of the Technical position are relying on no further stimuli and hope that physical demand will stay on the sidelines. Get ready for a dramatic day in New York!

LBMA price setting:  $1,325.70 down from Wednesday 14th July’s $1,340.25.

The gold price in the euro was set at €1,192.71 down €17.56 from Wednesday’s €1,210.27.

Ahead of the opening in New York the gold price stood at $1,328.05 and in the euro at €1,195.20.  

Silver Today –The silver price closed in New York at $20.38 on Wednesday up from $20.09 Tuesday.  Ahead of New York’s opening the price was trading at $20.15.

Price Drivers

The extraordinary features of the gold market are that they do not reflect the balance of demand and supply, either totally or even the marginal amounts outside those amounts ‘subject to contracts’. So called ‘efficient markets’ are supposed to reflect these fundamentals and changes in physical demand and supply.

Shanghai is trying to do that, but is hesitant to impose their fundamentals on the global gold price, even though they should be entitled to do so in view of the fact that they have the largest, most active physical market in the gold world.

No, the biggest influence on the gold price is the ‘paper’ gold market on COMEX where 5% or less of the transactions require a physical settlement. However, we are seeing U.S. demand for physical gold for the gold ETFs based in the U.S. have a decidedly strong impact on prices, despite such gold being bought and sold in London.

This makes the global gold market far from an ‘efficient’ market and one likely to remain so until Shanghai exerts it potential influence on gold prices. What’s holding them back? We believe it is their desire to acquire as much gold as possible for the retail, institutional and retail Chinese gold markets, as all such sources are considered ‘China’s gold” [easily available for confiscation should the authorities decide to do that].

But the gold price is far from just a ‘commodity’ price. It is a monetary metal.  As we said yesterday, “The prime drivers of the gold price remain macro-economic and monetary factors which will not change overnight.”

The degradation of the value of currencies give a facet to the gold price which ‘reverses’ the gold price, making gold a pricer of currencies, not currencies pricing gold [which is how the majority of investors view the gold price]

Gold ETFs – In New York on Tuesday there were no sales or purchases into either the SPDR gold ETF or the Gold Trust, leaving their holdings at 965.221 tonnes and at 214.54 tonnes respectively.

We expect activity in this market to pick up later today in New York.

Since January 4th this year, the holdings of these two gold ETFs have risen by 382.17 tonnes.

Silver –Silver prices could be extremely volatile and have slipped along with gold after the BoE decided not to raise rates.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance [Gold Storage geared to avoid its confiscation]

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