Holiday strength in gold, silver – and the dollar

Gold Today –New York closed at $1,132.00 24th December after closing at $1,128.80 on the 23rd December. London opened again at $1,140.00 today.

 Overall the dollar is stronger against global currencies today. Before London’s opening:

         The $: € was slightly stronger at $1.0436: €1 from $1.0444: €1 Friday.

         The Dollar index was stronger at 103.21 from 103.04 Friday. 

         The Yen was weaker at 117.77: $1 from Friday’s 117.37 against the dollar. 

         The Yuan was weaker at 6.9578: $1, from 6.9488: $1, Friday. 

         The Pound Sterling was weaker at $1.2226: £1 from Friday’s $1.2256: £1.

 Yuan Gold Fix

Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2016  12    27

      2016  12    23

      2016  12    22  

SHAU

SHAU

SHAU

260.78

260.14

260.14

261.05

259.34

259.34

$ equivalent 1oz @  $1: 6.9578

      $1: 6.9488

$1: 6.9475

  $1165.77

$1,164.63

$1,164.63

$1,166.97

$1,161.05

$1,161.05

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.]

 The Shanghai Gold Exchange’s much steadier gold price is now $28 above New York and $21 above London’s prices. With the Chinese New Year rushing towards us, we continue to see Chinese demand running high at retail levels encouraged by a falling Yuan. The fall in the Yuan will continue in 2017 we believe.

We do see the People’s Bank of China using continuing to use forex reserves to soften the fall of the Yuan, but making no attempt to prevent it. Just as the Euro, the Pound Sterling and the Yen attribute the recent weaknesses to dollar strength, so can China. All these nations are delighted to see the present low exchange rates, as what was called the “Currency War” had this objective from the start. The U.S. has helped them to this end.

LBMA price setting:  The LBMA gold price setting was at $1,139.75 this morning against yesterday’s $1,131.00. 

The gold price in the euro was set higher at €1,092.55 after yesterday’s €1,082.09.

Ahead of the opening of New York the gold price was trading at $1,138.25 and in the euro at €1,092.84.  At the same time, the silver price was trading at $15.86.

 Silver Today –Silver closed at $15.72 at New York’s close yesterday from $15.80 on the 23rd    December. 

Price Drivers

The dollar is stronger today and yet the gold price is now rising. Too much is often made of the link between the dollar and gold in dollar terms. There have been many periods when the dollar has risen alongside gold and we expect 2017 to see that happen often.

This also means the gold price will rise further in currencies weak against the dollar. We remain positive about gold going forward, so as we have said in the past, the professional is looking to see if we have seen the bottom and if so goes back in and is patiently holding his position ahead of the rise.

The markets are still in holiday mode ahead of the New Year, so we should not read too much into the markets this week. We see that in the small tonnage sold in the last day from the SPDR gold ETF. The amount is a strange figure but one we have seen many times before. It looks like a short term trader is trying to read the market on a daily or weekly basis and positioning himself, accordingly. If the price rises, we expect this amount to be purchased back in the days to come.

Monte dei Paschi

With Monte dei Paschi failing to attract new funds and the shares suspended, all efforts are now focussed on preventing ‘ripple’ effects across Europe and perhaps the Atlantic too. The E.C.B. has stated that the funds needed by the bank Monte dei Paschi should be doubled to rectify the Balance Sheet of the Bank. The Italian Government has agreed that it will use Taxpayer’s money to ‘bail’ the bank out. Now we wait for the details.

So an Italian bank crisis has been averted [UniCredit may go the same way?] but the terms of the bailout are important for the developed world banking industry. If Depositor’s funds are converted into shares in the bank we may see heavy shockwaves from investors holding bank bonds and loans across the banking industry. If this were to happen we would expect the gold price to rise.

Gold ETFs – Tuesday in New York, there were sales from the SPDR gold ETF of 1.186 tonnes of gold

but none were seen from the Gold Trust, leaving their respective holdings at 823.355 tonnes and 195.60 tonnes. 

Since January 4th this year, 218.485 tonnes of gold has been added to the SPDR gold ETF and to the Gold Trust. 

Julian D.W. Phillips 

 GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

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