Shanghai definitely now calling the gold tune

Gold Today –New York closed at $1,256.10 yesterday after closing at $1,257.20 Wednesday. London opened at $1,263.10 today. 

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

         The $: € was slightly stronger at $1.1227 after yesterday’s $1.1234: €1.

         The Dollar index was slightly stronger at 97.08 after yesterday’s 97.01

         The Yen was slightly stronger at 111.10 after yesterday’s 111.80:$1. 

         The Yuan was stronger at 6.8615 after yesterday’s 6.8737: $1. 

         The Pound Sterling was weaker at $1.2871 after yesterday’s $1.2973: £1.

Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    5    26

     2017    5    25

     2017    5    24

SHAU

SHAU

SHAU

 

 

280.35

279.54

Trading at 280.60

280.04

278.55

$ equivalent 1oz at 0.995 fineness

@    $1: 6.8615

       $1: 6.8737

       $1: 6.8906     

 

  /

$1,263.58

$1,261.82

Trading at $1,266.97

$1,262.18

$1,257.35

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.]

 

New York closed $6.08 lower than Shanghai’s close yesterday. London opened today at a $3.87 discount to Shanghai.

And there you have it. The evidence is clear that Shanghai is pulling both London and New York higher. Shanghai followed New York on the world clocks with London opening after that. While both London and New York are more volatile than Shanghai, Shanghai gold prices in the Yuan have moved steadily higher over the last few days.

This was in the face of the People’s Bank of China trying to control the Yuan and change the formula on which it is permitted to trade.

This year has seen the People’s Bank of China attack speculation. In the gold market rampant speculation has been controlled by putting a ceiling on the amounts traded per contract reducing them in the process. This has made it expensive to speculate in force. We have seen the results of this in a less volatile market there.

Now we have the People’s bank of China not just trying to limit speculative forces but change the orientation of the Yuan exchange rate to a ‘global-centric’ rate from a ‘dollar-centric’ rate. History shows that Chinese markets have lost credibility because of wild speculative forces [particularly the equity markets]. These efforts, while delaying the full lifting of Capital Controls, are stabilizing markets. We foresee that, as a result, we will see Chinese markets reputations improve and gain a stronger foothold in world markets.

In the gold world we foresee more producers and buyers of gold on contract turn to the Shanghai Benchmark prices from the pm London price setting. This is particularly so as the London price setting is different from the ‘spot’ prices at the time of price setting.

We are now convinced that gold’s pricing power has moved to Shanghai.

Silver Today –Silver closed at $17.16 yesterday after $17.19 at New York’s close.

LBMA price setting:  The LBMA morning gold price was set today at $1,265.00 from yesterday’s $1,257.10.  The gold price in the euro was set at €1,130.37 after yesterday’s €1,120.81.

Ahead of the opening of New York the gold price was trading at $1,265.80 and in the euro at €1,130.38. At the same time, the silver price was trading at $17.26 

Price Drivers

Currency markets across the world are relatively steady today as the gold price, once again nudges up against overhead resistance on this, the last and most active day of the week, the last week in May. Will the U.S. be volatile today in the gold market or silver market? We see New York following London higher. With long positions at low levels on COMEX that ‘paper’ market is more likely to go long than short, we feel. Hence we expect a positive day for gold there. Before New York opened gold was already pushing up through resistance, but more is needed before the break is convincing!

Will the present moves bring the long awaited strong move in gold and silver prices? We don’t know for sure, as we are in an important area for both gold & silver from a long term perspective, making any strong move now significant for the long term.

G-20 meeting

The G-20 meeting in Sicily is the center of attention for the media. In the past this has usually turned out to  be a non-event, but with President Trump there already lecturing on NATO allies failure to pay their bills for the protection the U.S. affords them, we expect a far more lively meeting. Of importance is now the huge surplus Germany has on the trade front. This has been apparent from the day the E.U. was formed as it prevented the exchange rate used in global trade by Germany [the euro] from reducing these surpluses, as it rose. If Germany still had the Deutschemark its rate would be so high as to prevent the surplus from happening in the first place. To bleat about it now is a little pointless and non-productive and far too late.

U.S. physical gold investors remain on the sidelines still and will do so until they see a strong rise in the gold price.

Gold ETFs – Yesterday, saw no sales or purchases of gold to or from the SPDR gold ETF and no change in the holdings of the Gold Trust. Their holdings are now at 847.452 tonnes and at 202.82 tonnes respectively.

Julian D.W. Phillips 

 GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

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