Has gold found a $1200 base with a turbulent and divisive future?

Gold Today –New York closed at $1,205.60 on the 18th January after closing at $1,215.60 on the 17th January. London opened at $1,203.30 today.

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

         The $: € was stronger at $1.0652: €1 from $1.0687: €1 yesterday.

         The Dollar index was stronger at 101.20 from 100.69 yesterday. 

         The Yen was weaker at 114.80: $1 from yesterday’s 113.45 against the dollar. 

         The Yuan was weaker at 6.8767: $1, from 6.8425: $1, yesterday. 

         The Pound Sterling was stronger at $1.2302: £1 from yesterday’s $1.2298: £1.

Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    1    19

     2017    1    18

      2017    1    17

SHAU

SHAU

SHAU

/

271.53

270.74

/

271.12

272.18

$ equivalent 1oz @  $1: 6.8767

      $1: 6.8425

$1: 6.8860

  /

$1,234.28

$1,222.91

/

$1,232.41

$1,229.41

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 continues to trade over 271 Yuan holding its ground. The reason for the fall in dollar prices was a strengthening of the U.S. dollar.

In the last month the Yuan gold price has gone from 259 to 272 with the gold price in Yuan.

We stated yesterday that, “if pricing power does reside in Shanghai as it has done in the last fortnight the Yuan price of gold will either hold or rise in the Yuan.” It has held these levels.

New York closed $21.89 lower than Shanghai on yesterday. London opened at around $24.19 lower than Shanghai was trading today. This is a wide differential so the next day will see which center follows which.

LBMA price setting:  The LBMA gold price setting was at $1,203.35 this morning against yesterday’s $1,212.50. 

The gold price in the euro was set lower at €1,129.06 after yesterday’s €1,135.25 as the dollar weakened.

Ahead of the opening of New York the gold price was trading at $1,203.00 and in the euro at €1,128.94.  At the same time, the silver price was trading at $16.96. 

Silver Today –Silver closed at $17.08 at New York’s close yesterday from $17.17 on the 17th January. 

Price Drivers

Right now with no U.S. gold ETF buying the exchange rate of the dollar is moving the dollar gold price. In the euro and the Yuan, it is much more stable. It has overcome the psychological barrier of $1,200 and is building a firm foundation for moves higher in line with the steadily rising Yuan price.

India – We haven’t seen any sign of Indian demand affecting the gold price, but it is coming as fast as the Indian printing presses can print the new high denomination notes.

President-elect Trump continues to be a ‘master of the media’, with every seemingly outrageously attacking comment he makes, making headlines. Was it Mae West who said, “There’s no such thing as bad publicity”? It seems that Trump agrees. He comes in tomorrow [with an argument in the press of how many will attend his inauguration – really!] as the President of the U.S.A. for four years at least!

In Davos at the World Economic Forum the concern is about the rise of ‘Popularism’ and the threat to the establishment. Also job destroying, artificial intelligence is a concern. These two do have the potential to make global electorates most unhappy, particularly in the west. These two will be a major factor in social unrest, not of themselves but underpinning other issues that cause people to force change in the future. The sum total of the reports out of that haven is that the future will be turbulent and divisive.  

In China, these undercurrents will be felt less as most of its people are government supportive as they have only recently escaped poverty and are content. But even there, the popularity of gold continues to grow as the alternatives have been disappointing. With the government taking ever greater measures [while avoiding direct capital controls] to stem the outflow of funds from the country, many will turn to gold to avoid the falling Yuan. At the end of the day the government will give into downward pressures on the Yuan. Never in history have government measures succeeded in halting a devaluation of its currency when overwhelming, market forces push it down.

The question for Trump is, “Does the Treasury have enough resources to push the dollar down?” as he wants?

U.S. physical selling from the U.S.-based gold ETFs continues to be absent from the market. But there was a small purchase into the Gold Trust yesterday.

Gold ETFs – Yesterday, in New York, there no purchases or sales into or from the SPDR gold ETF (GLD) but there was a purchase into the Gold Trust (IAU) of 0.45 of a tonne of gold, leaving their respective holdings at 807.96 tonnes and 198.75 tonnes. 

Since January 4th 2016, 205.83 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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