Gold and silver steady ahead of BoJ and FOMC

Gold TodayNew York closed at $1,313.30 yesterday.  London opened at $1,319.

    • The $: € was weaker at $1.1187: €1 from $1.1159: €1 yesterday.
    • The Dollar index was slightly weaker at 95.82 from 95.92 yesterday.
    • The Yen was slightly stronger at 101.76: $1 up from 102.04: $1 yesterday against the dollar.
    • The Yuan was slightly stronger at 6.6700: $1 from 6.6737: $1 yesterday.
  • The Pound Sterling was again weak at $1.2989: £1 from Friday’s $1.3058: £1.

Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
     2016  09  20

     2016  09  19

SHAU

SHAU

283.31

282.79

283.29

283.49

Dollar equivalent @ $1: 6.6700

$1: 6.6737

$1,321.13

$1,317.97

$1,321.04

$1,321.23

Shanghai did walk its own road today sitting at $1,321 throughout the day, despite the lower gold price close in New York. London opened close to that level, but quickly slipped back to $1,315.

We are now less than two weeks away from the adoption of the Yuan as one of the currencies that make up the SDR.  The Yuan is being restrained at current levels, but we see it falling against the dollar for at least the rest of the year.

LBMA price setting:  The LBMA gold price setting was at $1,315.40 barely changed on yesterday’s $1,315.05.

The gold price in the euro was set at €1,175.83 against yesterday’s €1,178.41.

Ahead of the opening of New York the gold price was trading at $1,313.80 and in the euro at €1,174.82.  At the same time, the silver price was trading again at $19.12.

Silver Today –The silver price rose to $19.16 at New York’s close yesterday up from $18.77, Friday.  

Price Drivers

Today the Bank of Japan and the U.S. Fed’s Open Market Committee (FOMC) begin their deliberations on policies. Japan is due to announce their decisions first followed by the Fed.

Once again, markets are obsessed with these events, despite expectations that neither central bank will do anything except fine tune past statements. Nevertheless two key government stock traders tell us to be ready for a shock rise of 0.25% and other tell us that the Bank of Japan will go further into negative rates. Will this boost the economy of Japan? No! It seems that so far the bank’s moves have proved counter-productive.

We believe that current moves are about exchange rates. Despite the “Currency War” being denied, we are all aware that it is on and going full bore. Japan desperately wants a cheaper Yen and to date has only seen the Yen getting stronger. Another move of interest rates into negative territory may help, but we doubt it. Why? As we have said the Treasury and the Fed of the U.S. don’t want a stronger dollar against all currencies, because that weakens their export potential and cheapens imports that are helping to undermine local production. So the Fed has to consider if a rate hike will assist in strengthening the dollar as well as other factors. They have made that clear in past announcements.

Will gold fall on a rate hike? Possibly, temporarily, but history shows that a rate hike may also cause the gold price to rise. We would not bet on a rate rise affecting gold prices for a long time. We would expect gold price to move higher once any rate hike has been absorbed.

Gold ETFs – There was no change in the SPDR gold ETF (GLD) but sales of 2.33 tonnes from the Gold Trust (IAU) Friday, leaving their respective holdings at 942.611 tonnes and 223.51 tonnes.

Silver – Silver prices are straining at the leash as they rise over $19.00 wanting to run further. These are not the influences of fundamentals but U.S. silver investors expecting news that will send both gold and silver prices higher.

Julian D.W. Phillips:  GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

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