Gold and silver see strong support above $1,300

Gold TodayGold closed in New York at $1,323.20 on Monday after Friday’s close at $1,321.10.  London opened at $1,321.

    • The $: € was at $1.1172 from $1.1187 Monday.
    • The dollar index was at 95.76 from 95.60 Monday.
    • The Yen was at 102.37 from Monday’s 102.14 against the dollar.
    • The Yuan was the same at 6.680 from 6.680 Monday.

 

  • The Pound Sterling was weaker at $1.3072 from Monday’s $1.3107.

 

Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
2016  08  30

2016  08  29

SHAU

SHAU

284.81

283.32

284.56

283.68

Dollar equivalent @ $1: 6.680

$1: 6.680

$1,326.13

$1,319.20

$1,324.97

$1,320.87

As you can see Shanghai followed New York  but London reopened at Friday’s levels ignoring both New York and Shanghai. The dollar remains stronger.  

LBMA price setting:  There was no gold price setting on Monday as London was closed. On Tuesday the setting was at $1,318.85.

The gold price in the euro was set on Tuesday at €1,180.71 up on Friday’s 1,173.20.

Ahead of the opening in New York the gold price was reported as trading at $1,319.00 and in the euro at €1,182.22.  The silver price is trading at $18.77 ahead of New York’s opening.

Silver Today –The silver price closed in New York at $18.84 Monday up from $18.64 Friday.  

Price Drivers

What gold investors should not take their eyes off is the price of gold in other currencies as these are important to the real value of gold.

  • For instance the Chinese Yuan continues to sink against the U.S. dollar, so we are now seeing Yuan gold prices rise.
  • The Pound Sterling continues to fall against the dollar, so U.K. gold prices are rising.
  • In the U.S. Dollar the gold prices are sitting at their lower levels after the surge in the dollar exchange rate against all other currencies.
  • In Australia the falling Aussie dollar has made their gold mines profitable.
  • In South Africa the gold miners’ incomes suffered when ‘yield tourists’ turned to the Rand with its high interest rates. But as is South Africa’s unique political myopia, the resurgence of the South African police’s attack on the Minister of Finance is sending the Rand down from R13.3 to R14.4 against the U.S. dollar improving profitability to that extent.

Likewise gold owners are using gold to hedge against their own currencies within their countries. So gold is functioning well in measuring the value of currencies.

Please note that the moves in the last few days in the gold price have seen barely any physical action, so prices were simply adjustments to changes in exchange rates. In this way, gold is acting as a measure of value inside countries and not simply in comparison to its price in other currencies. It is a real defense against your own currency.

With the palpable negative view of a stronger U.S. dollar by the Fed and Treasury in the U.S. where will gold go now?

It is then that physical demand [a measure of confidence in currencies overall] adjusts the value of gold in all currencies.

Gold ETFs – In New York yesterday there was no change in the SPDR gold ETF but a purchase of 0.54 of a tonne into the Gold Trust. This left their respective holdings at 956.588 tonnes and 225.44 tonnes.

Silver – The silver price is moving higher at $18.7 at London’s opening and is doing so while gold’s moves looked like they may continue to go down. Once again we are seeing greater vigor in the silver price on the upside just as it demonstrated vigor when falling down from over $20. The fundamentals of gold are weighed in favor of an upside move back to that level, so now we wait to see what New York will do with the silver price.      

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

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