Gold falls further on Fed talk but fundamentals still remain good

Gold Today –New York closed at $1,239.50 yesterday after closing at $1,256.90 Wednesday. London opened at $1,234.00 today. 

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

         The $: € was weaker at $1.0932 after yesterday’s $1.0912: €1.

         The Dollar index was slightly stronger at 99.11 after yesterday’s 99.08

         The Yen was weaker at 112.96 after yesterday’s 112.16:$1. 

         The Yuan was weaker at 6.8949 after yesterday’s 6.8921: $1. 

         The Pound Sterling was weaker at $1.2887 after yesterday’s $1.2923: £1.

Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    5    4

     2017    5    3

     2017    5    2

SHAU

SHAU

SHAU

/

280.58

281.20

/

280.04

280.79

$ equivalent 1oz @    $1: 6.8949

       $1: 6.8921

       $1: 6.8969

      

  /

$1,266.23

$1,268.15

/

$1,263.80

$1,266.30

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 277.10 towards the close today. This translates into $1,245.02. New York closed at a $5.52 discount to Shanghai’s close yesterday. London opened at a discount of $11.02 to Shanghai’s close today.

London is leading the way down at the moment, following Shanghai’s close and New York is beginning to show signs of buyers coming in. But we note that not until today did London outrun the others in taking the gold price down.

LBMA price setting:  The LBMA gold price was set today at $1,235.85 from yesterday’s $1,253.95.  

The gold price in the euro was set at €1,130.18 after yesterday’s €1,148.88.

Ahead of the opening of New York the gold price was trading at $1,234.35 and in the euro at €1,129.53. At the same time, the silver price was trading at $16.49. 

Silver Today –Silver closed at $16.47 yesterday after $16.83 at New York’s close Tuesday. The silver price’s fall is slowing another sign that the gold prices may well be looking to establish a bottom at current levels.

 Price Drivers

The Fed remains positive on U.S. growth despite the slowdown in the first quarter.  The indications are that the joblessness rate is now at maximum employment and the inflation rate getting close to the targeted 2%. This allows the Fed to continue discussions on shrinking the Fed’s Balance Sheet and leaving the door open for a June rate hike. The market saw this as negative for gold which has fallen heavily in the last day. We had forecast a strong move either way. It became clear that the Fed’s statement was the trigger for the fall, albeit that it has taken the New York, Shanghai and London sessions to make that happen.

The fundamentals remain good for gold, so we are watching to see if the fall in gold prices will hold for long?

France

It is looking more and more like a President Macron in France, but one wonders, without a political party behind him, how will he carry out his policies? Each policy will be assessed by the current political parties before they give him their backing. A victory by him will mean a continuation of the E.U. in its present form, for now.

Gold prices long-term.

Over the next decade, we will see a heavy fall in the volume of newly mined gold. Due to the decaying state of world politics and growing divisions in the monetary world, we are certain that global demand for gold will continue to rise. At some point the availability of scrap gold will suddenly shrink as the inevitability of a price surge becomes imminent. There will be no turning back of gold prices from then on.

Gold ETFs – Yesterday saw no sales or purchases from or into the SPDR gold ETF but the Gold Trust saw purchases of 0.41 of a tonne. Their holdings are now at 853.362 tonnes and at 204.23 tonnes respectively.

Julian D.W. Phillips 

 GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

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