Purchases into GLD suggest change in attitudes towards gold in USA

Gold Today –New York closed at $1,198.30 on the 13th January after closing at $1,195.40 on the 12th January. London opened at $1,202.25 today.

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

         The $: € was stronger at $1.0593: €1 from $1.0633: €1 Friday.

         The Dollar index was slightly stronger at 101.70 from 101.33 Friday. 

         The Yen was stronger at 114.11: $1 from Friday’s 114.70 against the dollar. 

         The Yuan was weaker at 6.9082: $1, from 6.8873: $1, Friday. 

         The Pound Sterling was weaker at $1.2056: £1 from Friday’s $1.2168: £1.

Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    1    16

     2017    1    13

      2017    1    12

SHAU

SHAU

SHAU

/

268.51

269.17

/

268.96

269.25

$ equivalent 1oz @  $1: 6.9082

      $1: 6.8873

$1: 6.9225

  /

$1,212.61

$1,215.59

/

$1,214.64

$1,215.95

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 gold prices, having corrected on Friday, are, again, moving higher touching 270.1 Yuan or $1,211.1 in today’s trading [using the same quality of gold]. It is always tempting to make prices simple to understand even if it means attributing any moves in the gold price to any handy piece of news locally. But that would be misleading. Chinese prices are rising because of Chinese market conditions, not because of Trump’s latest tweet.

New York closed $11.34 lower than Shanghai on Friday. London opened at $3.85 lower than Shanghai was trading today.

LBMA price setting:  The LBMA gold price setting was at $1,202.75 this morning against Friday’s $1,196.35. 

The gold price in the euro was set higher at €1,135.96 after yesterday’s €1,123.54 as the dollar weakened.

Ahead of the opening of New York the gold price was trading at $1,203.30 and in the euro at €1,135.98.  At the same time, the silver price was trading at $16.84. 

Silver Today –Silver closed at $16.80 at New York’s close Friday from $16.78 on the 12th January. 

 Price Drivers

While Shanghai continues to drive gold prices higher, we can now see a change in attitude towards gold in the U.S. as in both the Gold Trust and the SPDR gold ETF we are now, once again, seeing good purchases of gold volumes [not huge].

U.S. buying will not drive U.S. prices, as the physical gold bought into these two ETFs happens in London, not New York. But as the price upward pressure from this buying joins with Shanghai’ demand, we expect a shortage of gold in London to be exacerbated and take prices higher.

It is becoming clearer to all that President Trump will bring his deal-making business tactics to foreign policy, much to the objection of current foreign policy makers. This is well illustrated by his attitude to China and Taiwan. He has made it clear he wants something in return for keeping that policy. We suspect that China is now confident enough in its own global power to stand up to his attitude. But Trump, as we have seen in his campaign and books, will not back off.  This has to lead to global tensions ballooning. This will be positive for gold.

We expect the ‘ripples’ from the ensuing pressures to be felt first in global trade, but more so in the currency world spreading to changes in the monetary system. Again, this is positive for gold and silver as, perhaps, U.S. gold ETF buying is indicating.

As we said on Friday, “The psychological $1,200 will cause the gold price to pause as it is doing now. But we feel $1,200 will not be a significant barrier.”

U.K. – The Pound Sterling fell below $1.20, before recovering a little ground,  ahead of Prime Minister May’s speech on Brexit due tomorrow. We understand this as it has given Britain a tremendous trade boost, as the Pound has fallen from around $1.50 since Britain voted to leave the E.U. And Brexit has not yet been triggered! In other words, the Pound continues to fall against gold!

The E.U.’s Draghi would only wish to see the same happen to the euro.

Gold ETFs – Friday, in New York, there were purchases of 2.964 tonnes into the SPDR gold ETF but no change in the Gold Trust holdings, leaving their respective holdings at 807.96 tonnes and 198.30 tonnes. 

These purchases into the SPDR gold ETF are the first since the Fed raised interest rates and Trump was elected!

We did not think this would happen until President Trump was well settled in the White House. But as a sign that market attitudes are changing in the U.S. towards gold, the buying has begun in earnest. The first purchases happened last week into the Gold Trust.

Since January 4th 2016, 205.38 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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