The Chinese have not lost their appetite for gold

Gold TodayNew York closed yesterday at $1,318.00 yesterday.  London opened at $1,323.00.

    • The $: € was slightly weaker at $1.1232: €1 the same as $1.1232: €1 yesterday.
    • The Dollar index was stronger at 95.52 from 95.30 yesterday.
    • The Yen was stronger at 102.68: $1 up from 102.18: $1 yesterday against the dollar.
    • The Yuan was slightly weaker at 6.6733: $1 from 6.6800: $1 yesterday.
  • The Pound Sterling was weaker at $1.3201: £1 from yesterday’s $1.3263: £1.

Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
     2016  09  14

     2016  09  13







Dollar equivalent @ $1: 6.6733

$1: 6.6800





Shanghai went $7 higher than New York but London pulled it back but not far.

This is the second day that we have seen pricing in Shanghai separating itself from New York. London’s pricing seems to respect Shanghai and could be asking the same question. Exchange rates appear to have a key influence on prices at the moment.

We are often the victims of the media’s views on China. They have led us to believe that all in not well in China’s economy. However, we see wages rising, house prices moving higher and industrial production climbing, factors that are the envy of the developed world. This insinuates that the middle classes are thriving and in a position to buy more gold.

Some say higher prices slow buying, but others that rising prices in the Yuan speak of a weakening Yuan, an incitement for Chinese investors to buy. We have no doubt that the Chinese have not lost their appetite for gold. While they are about to enjoy two national holidays they will be back!

LBMA price setting:  The LBMA gold price setting on Monday was at $1,323.20. Yesterday it was at set at $1,328.50.

The gold price in the euro was set at €1,177.59 against yesterday’s €1,182.26.

Ahead of the opening of New York the gold price was trading at $1,321.75 and in the euro at €1,177.77.  At the same time, the silver price was trading at $19.00.

Silver Today –The silver price was  $18.87 at New York’s close yesterday down from $19.13, the day before.  

Price Drivers

We do believe that the equity market is overpriced and have said this for some time. These markets are rising without there being underlying growth of income, because the economic growth levels are far below that of a healthy economy. These markets are rising because equities are giving dividends that provide more yield than bonds. Almost any rate increase will hammer bond and equity markets.

But there is an almost blithe trust that the U.S. economy is getting healthy. Yes, it is not deflating visibly, held up by Fed stimuli. Fed officials keep telling us of the dangers in and outside of the U.S. but this is being treated lightly, with cries that the time for a rate rise is now in a week’s time the overall Fed will speak and markets will react to what they say as if it were a surprise. At that time we expect a surge in volatility, which could well encompass gold and silver markets in the U.S.

Nevertheless, the gold and silver markets will always respond to currency values against each other with the U.S. dollar being the pivot of the currency world.

Gold ETFs – There were sales of 4.451 tonnes of gold from the SPDR gold ETF (GLD) but a purchase of o.45 tonnes into the Gold Trust IAU) yesterday, leaving their respective holdings at 935.489 tonnes and 225.84 tonnes.

Silver – Once again, like gold, the silver price appears unwilling to fall through support at $19 for any length of time. As we’ve said before, silver will follow gold and neither its technical picture nor its fundamentals, a pattern set some years ago. It is being treated as a monetary metal and has been throughout those years.

Julian D.W. Phillips | | StockBridge Management Alliance


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