Gold and silver stabilizing

Gold TodayNew York closed at $1,228.00 yesterday after the previous close of $1,218.20 London opened at $1,230.00 but then fell back from Shanghai prices even further.

    • The $: € was a stronger at $1.0699: €1 from $1.0773: €1 yesterday.
    • The Dollar index was a stronger at 100.43 from 99.72 yesterday.
    • The Yen was weaker at 109.69: $1 from yesterday’s 107.91 against the dollar.
    • The Yuan was weaker at 6.8741: $1 from 6.8556: $1 yesterday.

 

  • The Pound Sterling was weaker at $1.2437: £1 from yesterday’s $1.2493: £1.

 

Yuan Gold Fix

Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
     2016  11    16      

     2016  11    15

     2016  11    14

SHAU

SHAU

SHAU

274.11

272.33

269.11

274.03

272.48

269.50

$ equivalent 1 oz @ $1: 6.8741

$1: 6.8556

$1: 6.8450

$1,240.27

$1,235.55

$1,222.83

$1,239.91

$1,236.23

$1,224.60

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.]

Shanghai is walking a different road to both London and New York as you can see. The gold quality differential is around $5, so we take that off London and New York prices to get a valid comparison. This leaves Shanghai trading $5 above London’s opening and this figure rose during the morning to move to $10 as Shanghai closed.  Just how far the differentials between New York and Shanghai go in the next few days will give us a clear indication of who’s leading who.

With the dollar now breaking through overhead resistance at 100 on the dollar index and the Yuan continuing to weaken, it is not surprising that Chinese investors are increasing demand as gold remains one of the most stable of investments. But of key concern to us is the point at which arbitrageurs smooth out the differences between the two markets.   Our forecast of the Yuan to reach 7: $1 by year’s end is on track, thus encouraging more demand for gold inside China.

In dollar terms the gold price in New York and London is relatively stable against the dollar and rising in all other currencies.

LBMA price setting:  The LBMA gold price setting was at $1,225.70 against yesterday’s $1,222.60. The gold price in the euro was set higher at €1,143.89 against yesterday’s €1,134.72.

Ahead of the opening of New York the gold price was trading at $1,223.50 and in the euro at €1,143.99.  At the same time, the silver price was trading at $16.95.

Silver Today –Silver rose to $17.07 at New York’s close yesterday from $16.85, the day before.  

Price Drivers

The dollar is powering ahead and above 100 on the dollar index. It is allowing the dollar price of gold to fall while the euro price of gold is rising. Gold is moving much higher in the Yuan and other world currencies so providing a haven against national currencies in the local markets.

The B.I.S. is warning that a strong dollar will bring global financial instability. But one of the driving forces behind the dollar is the near market certainty that there will be a rate hike in December. The ‘carry’ trade [borrowing dollars and lending into high interest rate currencies] is therefore retreating as any interest gains made to date are being eroded by weaker exchange rates and a higher cost dollar.  

The strong dollar is not gaining confidence outside the U.S. It is a technical ‘carry trade’ exercise that will stop in the short term.

Once again the financial media’s focus until the next FOMC meeting will be on the Fed.

India’s draconian money controls. – As a result of Finance Min[ster Arun Jaitley’s statement that India’s business community should prepare for cashless economy using checks, cards, payment gateways or digital transactions, is causing havoc not just at retail levels, but in most of India’s industries. Trading in cotton, for instance has virtually stopped as they wait for available cash to do business in, in what is a cash business. But this is not the first time that the Indian government has done this. In 1978 all notes above Rs.100 [today 66.80 Rupees = $1] were banned, but later re-issued.  

In an attempt to dispose of these notes from hands that had not disclosed that they were profits, people were buying gold at $2,250 an ounce with these notes since the removal of these notes from circulation.

Overall, this is an attempt by the government to impose a developed world monetary system on the country in less than one month. Such an imposition has been seen in the developed world and it succeeded, but in India we doubt that it will have success in achieving its aims. [We will discuss this in depth in the next issue of Gold Forecaster for subscribers!] –

Gold ETFs – There were sales of 1.483 tonnes of gold from the SPDR gold ETF and sales of 1.65 tonnes from the Gold Trust yesterday, leaving their respective holdings at 927.446 tonnes and 211.02 tonnes.

These sales of gold from the SPDR gold ETF and from the Gold Trust are slowing considerably and caused the gold price to begin recovering.

Since January 4th this year, 337.457 tonnes of gold has been added to the SPDR gold ETF and to the Gold Trust.

Silver – Silver is stabilizing around $17 in line with gold finding a bottom around $1,220. The selling pressure is easing on both metals ahead of a rally.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

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