Gold falls below support. Indian gold sees strength.

Gold Today –New York closed at $1,269.50 yesterday after closing at $1,263.80 Tuesday. London opened at $1,264.40 today. 

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

         The $: € was weaker at $1.0892 after yesterday’s $1.0877: €1.

         The Dollar index was weaker at 99.01 after yesterday’s 99.19

         The Yen was stronger at 111.30 after yesterday’s 111.47:$1. 

         The Yuan was weaker at 6.8940 after yesterday’s 6.8907: $1. 

         The Pound Sterling was stronger at $1.2900 after yesterday’s $1.2815: £1.

Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    4    27

     2017    4    26

     2017    4    25

SHAU

SHAU

SHAU

/

282.31

283.54

/

282.17

283.39

$ equivalent 1oz @    $1: 6.8940

       $1: 6.8907

       $1: 6.8862

      

  /

$1,274.30

$1,280.69

/

$1,273.67

$1,280.01

Please note that the Shanghai Fixes are for 1 gm of gold. From the Middle East 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 was trading at 283.00 towards the close today. This translates into $1,272.42. New York closed at a $2.92 discount to Shanghai’s close yesterday. London opened at a discount of $8.02 to Shanghai’s close today.

While Shanghai’s gold prices continue to slip, New York took prices up to the level of Shanghai’s close yesterday [Take $5 off Shanghai prices in the table to see that, to account for the difference in the quality of gold being priced] but London pulled prices back at its opening.

LBMA price setting:  The LBMA gold price was set today at $1,264.30 from yesterday’s $1,264.95.  

The gold price in the euro was set at €1,159.38 after yesterday’s €1,162.96.

Ahead of the opening of New York the gold price was trading at $1,265.30 and in the euro at €1,162.53. At the same time, the silver price was trading at $17.43. 

Silver Today –Silver closed at $17.49 yesterday after $17.63 at New York’s close Tuesday. Silver is falling much faster than gold. As the silver price primarily reflects the U.S. silver market their price is certainly pointing downwards. If gold does not follow you can be sure that there will be a strong bounce soon. But if gold does break down, the silver price may well not fall as far.

Price Drivers

The gold price did not break down in New York yesterday but recovered to very close to Shanghai’s close yesterday.

There were no sales or purchases into or from the U.S. based gold ETFs, so there was no market reason for the rise and that rise dissipated in London.

The big event in the U.S. was the publication of the new U.S. Tax Code proposed by the Trump administration. While it was in line with his election promises, it has a long way to go before it is law. The market barely reacted to the event. There are doubts as to whether it will pay for itself as it relies on creating growth to generate additional income on which a similar amount of tax revenue will be achieved as is achieved today. Trump’s target is to also create ‘millions of jobs’ through such measures. As Bloomberg put it in an article yesterday, extra capital injections from richer companies could lead to loss of jobs as robots replace labor. This is happening and there are no proposals to find labor other permanent jobs.  Thus the President’s election promises are becoming more difficult to achieve by the day. That’s if they can be put into law.  

The second main event is that the NAFTA treaty will not be scrapped, but renegotiated. The election promises of scrapping it would have destroyed potentially millions of jobs, so Trump is having to be more pragmatic by the day. Such is reality.

The impact on the gold price was neutral. It was the weaker dollar that boosted gold in the U.S. slightly. But even there, the gold price has been slipping with a weak dollar the opposite of its usual behavior.

India

Akshaya Tritiya happens tomorrow in India. The market in India expects around 20-30% increase in demand during Akshaya Tritiya, compared to last year. This is because it is happening in the wedding season. It is clear that the new Rupee notes are now sufficient to completely replace the old notes. Add to that the stronger Rupee that has lowered the gold price to bargain prices for Indian buyers, in Rupees.

It may also be that the proposed 3% GST tax will bring forward more buying. What’s for sure is that the smugglers will be delighted with such a new tax, taking their potential income to double figures then. We have no doubt that in India smugglers now supply a major portion of gold supply.

Gold ETFs – Yesterday saw no sales or purchases in the two major U.S. gold ETFs after a sale of 5.921 tonnes out of the SPDR gold ETF (GLD) a day earlier but no change in the iShares Gold Trust (IAU). Their holdings are now at 854.25 tonnes and at 204.36 tonnes respectively.

Since January 6th 2017 47.20 tonnes have been added to the SPDR gold ETF and the Gold Trust.

Julian D.W. Phillips 

 GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

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2 thoughts on “Gold falls below support. Indian gold sees strength.

  1. Anuj Agarwal May 4, 2017 / 12:35 pm

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    Like

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