Gold price consolidating with positive bias

Gold TodayNew York closed at $1,266.10 yesterday after the previous close of $1,269.40 London opened at $1,264.00.

    • The $: € was stronger at $1.08.82: €1 from $1.0973: €1 yesterday after Draghi’s statements.
    • The Dollar index was stronger at 98.58 from 97.95 yesterday.
    • The Yen was unchanged at 103.77: $1 yesterday against the dollar.
    • The Yuan was heavily weaker at 6.7638: $1 from 6.7395: $1 yesterday.

 

  • The Pound Sterling was slightly weaker at $1.2226: £1 from Friday’s $1.2275 £1.

 

Yuan Gold Fix

Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
     2016  10  21

     2016  10  20

SHAU

SHAU

275.44

277.43

275.58

276.34

Dollar equivalent

1 oz @ $1: 6.7638

$1: 6.7395

$1266.62

$1,275.75

$1,267.26

$1,275.34

Please note that the Shanghai Fixes are for 1 gm of gold. From the Middle Eat eastward metric measurements are used against 0.9999 quality gold.

After Draghi’s remarks the euro slipped against the dollar, but not to the lowest level seen in the last year or so at 1.07, but it was the direction the E.U. wanted The Yuan is clearly being ‘managed’ lower. But this is in the face of a rising dollar. The Pound continues to slip steadily, something that counters the negative effect of the coming Brexit [in two years]. After all, the Pound is 15% cheaper than before the referendum, against a 10.7% fall in the Yuan since the beginning of this year.

LBMA price setting:  The LBMA gold price setting was at $1,263.95 against yesterday’s $1,269.75. The gold price in the euro was set higher at €1,160.65 against yesterday’s €1,154.63.

Ahead of the opening of New York the gold price was trading at $1,266.45 and in the euro at €1,262.63.  At the same time, the silver price was trading at $17.54.

Silver Today –The silver price fell to $17.53 at New York’s close yesterday from $17.68, Monday.  

Price Drivers

Shanghai kept the gold price in line with New York’s close, as did London. A correction now is healthy as the gold price is turning higher. As you can see below, purchases of around 3.5 tonnes of gold into gold ETF’ were seen in the U.S.  but dealers decided that this would not reflect in the gold price, for now.  These moves in the gold price remain small in percentage terms, so we cannot read too much into them. What we do see is that as the Yuan was weakened heavily we would have expected this to reflect in a higher gold price. In currencies other than the dollar, gold is holding or rising and should continue to do so, with the euro a case in point.

But just how far will the U.S. allow the dollar to rise against weakening currencies?  We do not expect the Treasury to let the dollar Index rise over 100 as this will hurt the U.S. recovery.

With a large set of purchases of gold into the SPDR gold ETF, we would have expected dollar gold prices to rise.  We expect them to rise today.

After all, the E.C.B kept a dovish tone indicating the battle against deflation is not doing too well. As Draghi said, the ‘risks remained to the downside’

A major shift in global power has just occurred which has been completely ignored by the financial markets of the world. The Philippines has just announced it is separating from the U.S. [a strategically key nation for the U.S. in the east] and aligning itself with China. This is a visible loss of power to the U.S. and a gain for China. This is a major step in the formation of the Chinese ‘empire’. Gold prices were untouched by it.

Gold ETFs – There were purchases of 2.967 tonnes of gold into the SPDR gold ETF and 0.6 of a tonne into the Gold Trust, yesterday, leaving their respective holdings at 970.175 tonnes and 228.16 tonnes.  

Since January 4th this year, the holdings of these two gold ETFs have risen by 397.356 tonnes.

Silver – Silver prices are expected to continue nervous as gold consolidates again.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

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