Gold price could weaken as Chinese New Year holiday kicks in

Gold Today –New York closed at $1,215.30 on the 23rd January after closing at $1,201.50 on the 20th January. London opened at $1,213.35 today.

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

         The $: € was weaker at $1.0752: €1 from $1.0730: €1 yesterday.

         The Dollar index was weaker at 100.20 from 100.42 yesterday. 

         The Yen was stronger at 113.24:$1 from yesterday’s 113.61 against the dollar. 

         The Yuan was stronger at 6.8534: $1, from 6.8541: $1, yesterday. 

         The Pound Sterling was stronger at $1.2482: £1 from yesterday’s $1.2452: £1.

 Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    1    24

     2017    1    23

      2017    1    20










$ equivalent 1oz @  $1: 6.8541

      $1: 6.8546

$1: 6.8765







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 was trading today just above 270 Yuan or in dollars, at today’s exchange rate, $1,226,15 having touched nearly 272 during the day. The dollar is only slightly weaker across the board, as well as against the Yuan.

New York, Monday, closed in line with gold prices in Shanghai earlier in the day, before New York opened. This is a first, as New York climbed up to Shanghai’s levels despite an over 2 tonne sell-off from the SPDR gold ETF.

London opened on Tuesday $8.00 lower than Shanghai was trading at today. Shanghai is, once again driving prices despite the stronger Yuan against the dollar. It demonstrates that gold is rising against all currencies today and in all gold markets.

Chinese New Year

This weekend sees the start of the Chinese New Year, so the current demand is particularly for that holiday, which will last a week. During that time the Shanghai Gold Exchange is likely to be quiet. Will this see a fall off in prices? It is likely that we will.

With India struggling to find the cash to buy gold still, India will not shore up the gap made next week. So it is likely we will see falling prices until the Chinese return.

LBMA price setting:  The LBMA gold price was set today at $1,213.30 down slightly from yesterday’s $1,213.75.  

The gold price in the euro was set lower at €1,129.39 after yesterday’s €1,134.35 as the dollar stabilized.

Ahead of the opening of New York the gold price was trading at $1,213.65 and in the euro at €1,129.61.  At the same time, the silver price was trading at $17.14. 

Silver Today –Silver closed at $17.18 at New York’s close yesterday from $17.07 on the 20th January. 

Price Drivers

Despite over 2 tonnes of sales of gold from the SPDR gold ETF yesterday, the gold price in New York rose. Of course, that sale would only be reported at the end of the day and if it was sold into the market, it would be sold into London, which did not move higher this morning in London. Nevertheless, the amount is not so large that it is a price mover, but after stuttering small purchases into the U.S. based gold ETF’s in the last fortnight this was the first sale seen since early January. It followed a purchase the business day before of 1.85 tonnes, so its impact would have to be muted.

President Trump is sticking to his election promises on the foreign policy front by cancelling the TPP trade deal. As we said yesterday, ‘He looks as though he will ensure a protectionist, introverted set of policies that will move away from the avuncular, globally dominant policies,” that we have been used to from the Second World War. This is not too dissimilar to the policies China has followed for the last two decades and we see the spectacular results in China. The emerging world will suffer, particularly those that relied on U.S. trade for their economic health. They will look for other avenues of capital and trade inflows.

We can see that happening right now as President Trump’s withdrawal of the U.S. from the TPP agreement presents an opportunity to China to move into its place, in that Agreement. With China having created such a power, so far, it is able to bring the other members under its influence. But China will only walk that road if China benefits independently of the U.S. – Sounds Trumpish, doesn’t it?

Gold ETFs – Monday, in New York, there were sales of 2.074 tonnes of gold out of the SPDR gold ETF but there were no purchases or sales into or from the Gold Trust, leaving their respective holdings at 807.071 tonnes and 198.75 tonnes. 

 Julian D.W. Phillips | | StockBridge Management Alliance 

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