Digesting BoE inaction – Gold and silver marked down

Gold TodayGold closed in New York at $1,333.80 on Thursday after Wednesday’s close at $1,332.20.  In Asia the gold price held similar levels to New York.  

  • The $: € fell to $1.1135 down from $1.1096.
  • The dollar index fell to 96.07 from 96.32 Thursday.
  • The Yen was weaker at 106.00 from Thursday’s 105.44 against the dollar.
  • The Yuan was slightly weaker at 6.6825 from 6.6855 Thursday.
  • The Pound Sterling was stronger at $1.3352 down from Thursday’s $1.3225 reacting to the mistake in expecting more easing now.

Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
2016  07  15

2016  07  14

SHAU

SHAU

285.95

288.94

286.62

287.60

Dollar equivalent @ $1: 6.6825

$1: 6.6855

$1,330.94

$1,344.26

$1,334.06

$1,338.02

The Chinese gold market followed New York yesterday as the Yuan picked up slightly over yesterday’s exchange rate. All global markets were surprised by the Bank of England’s inaction, despite the indication that if the U.K. economy slowed down between now and August, easing action would be taken. This left the markets in the same position as the Bank of England, waiting for post-Brexit data.

The attempt to break the gold price down further in New York, with yesterday’s over 2 tonnes sale of gold, continued, but with less enthusiasm. The Technical picture continues to point downwards but appears to lack conviction.

As we forecast yesterday, “It is clear that if the BoE does announce easing we may well see a very strong upward move in the gold price. If not we expect to see the gold price either move slightly higher or sideways, as this has been discounted in the gold price now.”

LBMA price setting:  $1,330.50 up from Thursday 14th July’s $1,325.70.

The gold price in the euro was set at €1,196.12 up €3.41 from Thursday’s €1,192.71.

Ahead of the opening in New York the gold price stood at $1,334.2 and in the euro at €1,199.33.  

Silver Today –The silver price closed in New York at $20.25 on Thursday down from $20.38 Wednesday.  Ahead of New York’s opening the price was trading at $20.26.

Price Drivers

Global financial markets were stunned by the lack of action by the Bank of England yesterday, despite an intention to add more easing should the U.K. turn down in the period until the next meeting.

With hindsight we can see why they did this. We don’t think it was because they had done enough to date, but we do see that like global markets, post Brexit data on the way forward and impact of Brexit needs to be assimilated, before decisions are made. Pre-Brexit information cannot point the way forward!

That throws us back to the ‘big’ picture, once again. There we see a stabilizing China with growth picking up to 6.7% indicating it is becoming less dependent on the developed world and now walking its own road. We do expect, long-term, that China’s economic activity will separate itself from that of the developed world, while continuing to draw wealth and power from it. The developed world continues to have a falling growth prospect and a rising debt burden threatening to hurt it badly. [It is different in China where economic growth enables loans to be repaid. This warrants higher debt levels]. The overall economic picture promises increasingly heavy exchange rate pressures that favor gold and silver.

Gold ETFs – In New York on Thursday there were sales of 2.376 tonnes of gold from the SPDR gold ETF but we did see purchases into the Gold Trust of 0.36 of a tonne, leaving their holdings at 962.845 tonnes and at 214.90 tonnes respectively.

Since January 4th this year, the holdings of these two gold ETFs have risen by 380.154 tonnes.

Silver –Silver prices are chomping at the bit towards the upside. The reins and the bit are being held back by the gold price only.

Julian D.W. Phillips

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

 

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