Improving Asian demand sees gold price trending higher

Gold TodayNew York closed at $1,273.60 yesterday after the previous close of $1,264.30 London opened at $1,275.55.

    • The $: € was weaker at $1.0911: €1 from $1.0877: €1 yesterday.
    • The Dollar index was weaker at 98.59 from 98.75 yesterday.
    • The Yen was stronger at 104.13: $1 from yesterday’s 104.42 against the dollar.
    • The Yuan was stronger at 6.7720: $1 from 6.7792: $1 yesterday.

 

  • The Pound Sterling was weaker at $1.2187: £1 from yesterday’s $1.2226 £1.

 

Yuan Gold Fix

Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
     2016  10  26

     2016  10  25

SHAU

SHAU

278.76

276.39

278.55

276.93

Dollar equivalent

1 oz @ $1: 6.7720

$1: 6.7792

$1,280.33

$1,268.10

$1,279.37

$1,270.58

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. [Please note that the 0.5% difference in price can be accounted for by the higher quality of Shanghai’s gold on which their gold price is based over London’s ‘good delivery’ standard of 0.995.]

Allowing for the difference in quality of gold priced, gold prices in Shanghai and London are in line. New York closed strongly higher with Shanghai lifting it slightly higher still. While there was good buying into the SPDR gold ETF, Asian demand together with that buying, is lifting the gold price higher in all currencies except the euro and Yuan.

LBMA price setting:  The LBMA gold price setting was at $1,273.90 against yesterday’s $1,269.30. The gold price in the euro was set lower at €1,166.25 against yesterday’s €1,166.85.

Ahead of the opening of New York the gold price was trading at $1,271.55 and in the euro at €1,164.26.  At the same time, the silver price was trading at $17.70.

Silver Today –The silver price rose to $17.75 at New York’s close yesterday from $17.59, the day before yesterday.  

Price Drivers

Asian demand remains buoyant. In India gold prics remain well below previous peaks, almost Rs. 10,000 below them so have considerable attraction to Indian investors still as Diwali arrives on Sunday. Thereafter the massive marriage season is underway.

In the developed world the festivities are at the year end, so manufacturers are busy making jewelry for that time. We, in the west, favor, not gold per se, but jewelry made up, in part, by 9 or 18 carat gold and precious or semi precious stones, whereas Asian demand favors pure 24-carat gold.

In the west such jewelry is not primarily held as an investment whereas jewelry in Asia is held for investment purposes, hence its purity. This makes it difficult to separate investment from jewelry.

In India, gold, once bought tends to stay in the family and passed from generation to generation.

In India, families are not deterred by government requirements or taxes on gold because if the government demands accountability investors buy smuggled gold with cash and refuse to comply with what they see as a corrupt government.

In China, memories of hyper-inflation and the revolution are present, alongside recent memories of poverty. The stock exchange is more like a casino in their eyes and property has become too speculative and overpriced, so gold remains the safe investment, more so as the Yuan declines.

With U.S. elections two weeks away there is a build-up of worry as to what lies ahead for the U.S. and the rest of the global economy. While both candidates are positive for gold prices, much more than that is worrying financial markets, as we look ahead to more uncertainty, greater financial risks and turbulence in 2017.

The environment is positive for gold, so these prices rises we are seeing now are looking solid. Gold ETFs – There were purchases of 3.262 tonnes of gold into the SPDR gold ETF but no change in the Gold Trust yesterday, leaving their respective holdings at 956.826 tonnes and 228.16 tonnes.  

Since January 4th this year, the holdings of these two gold ETFs have risen by 384.007 tonnes.

Silver – Longer term, silver prices should continue rising but at a slower pace than gold, for now.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

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