Shanghai leading gold higher?

 Gold Today –New York closed at $1,224.10 yesterday after closing at $1,219.30 yesterday. London opened at $1,228.55 today. 

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

         The $: € was slightly stronger at $1.0864 after yesterday’s $1.0870: €1.

         The Dollar index was slightly weaker at 99.64 after yesterday’s 99.65

         The Yen was stronger at 113.75 after yesterday’s 114.19:$1. 

         The Yuan was slightly stronger at 6.9047 after yesterday’s 6.9056: $1. 

         The Pound Sterling was weaker at $1.2875 after yesterday’s $1.2941: £1.

Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    5    12

     2017    5    11

     2017    5    10

SHAU

SHAU

SHAU

/

273.62

273.79

/

274.02

273.91

$ equivalent 1oz @    $1: 6.9047

       $1: 6.9040

       $1: 6.9064     

  /

$1,232.70

$1,233.03

/

$1,234.50

$1,233.57

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 275.60 towards the close today. This translates into $1,236.49. New York closed at a $17.39 discount to Shanghai’s close yesterday. London opened at a discount of $7.94 to Shanghai’s close today.

While New York rose slightly yesterday, Shanghai rose strongly and is leading the way for London.

On today’s moves, we would say Shanghai is dominating pricing power. As we said yesterday, Shanghai needed to stop falling before prices turn around. It has turned higher now.

LBMA price setting:  The LBMA gold price was set today at $1,227.90 from yesterday’s $1,221.00.  

The gold price in the euro was set at €1,129.21 after yesterday’s €1,123.48.

Ahead of the opening of New York the gold price was trading at $1,231.30 and in the euro at €1,128.60. At the same time, the silver price was trading at $16.45. 

Silver Today –Silver closed at $16.32 yesterday after $16.22 at New York’s close yesterday.

Price Drivers

Technically, it is time for gold to rise up into the pattern that it is forming. Its failure to breakdown further and the performance of the three gold markets across the world point higher today.

The latest figures on inflation in the U.S. has been hoped for and expected and is positive for the gold price. With negative interest rates here to stay for some time to come, the influence on gold is positive.

India

Demand for gold at the Akshaya Tritiya festival at the end of April was stronger than has been seen in the past confirming the problems with shortages of cash have dissipated. It is clear that Indian demand for gold is, once again, robust. Estimates for this year’s demand [because of positive forecasts for the monsoon as well] have gone as high as 1,000 tonnes. That’s official demand, excluding smuggled gold. In the past WGC estimates from years ago guesstimated smuggled gold was around 250 tonnes. It has certainly grown since then and will grow much more if the 5% GST tax is imposed on gold sales.

If one accepts this, China and India account for just over 80% of total supply [including scrap] of gold annually. This leaves very little for the rest of the world’s demand. If the rest of the world’s demand jumps, it will have a disproportionate impact on the gold price until that demand is pulled back by higher prices precipitating sales.

Gold ETFs – Yesterday once again saw no change in the SPDR gold ETF or the Gold Trust. Their holdings are now at 851.891 tonnes and at 201.69 tonnes respectively.

Julian D.W. Phillips 

 GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

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