Gold drifting with Shanghai closed for another day

Gold Today –New York closed at $1,267.00 yesterday after closing at $1,256.10 Friday. London opened at $1,264.00 today. 

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

         The $: € was stronger at $1.1157 after Friday’s $1.1227: €1.

         The Dollar index was stronger at 97.50 after Friday’s 97.08

         The Yen was slightly stronger at 111.07 after Friday’s 111.10:$1. 

         The Yuan was much stronger at 6.8546 after Friday’s 6.8615: $1. 

         The Pound Sterling was weaker at $1.2859 after yesterday’s $1.2871: £1.

Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    5    30

     2017    5    25

     2017    5    24

SHAU

SHAU

SHAU

 

 

280.35

279.54

On holiday still

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

On holiday still

$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.]

 While Shanghai is closed we feel it opportune re-make an important point on what is going on with the authorities in China, with reference to overall markets there. China wants to gain a reputation of being a reliable, reputable source of prices. This, in the first place, means reducing the volatility, on a permanent basis, that characterized its markets. Its people have become deeply untrusting of equity markets due to their past extreme volatility.

This policy has taken priority over the freeing up of Capital Controls despite the desire to be a freely floating currency. Once Chinese markets have the reputation, sufficient to attract foreign investors on a comparable basis to the U.S., the Chinese will be able to open up their borders and, hopefully, be attractive to global investors. Dropping Capital Controls before that would make Chinese markets extremely vulnerable.

In the gold market in Shanghai, since the beginning of this year, we have seen the People’s Bank of China attack speculation. By reducing the size and cost of individual contracts, speculation has become extremely expensive. The result of this is a less volatile market. Because Shanghai’s gold prices are exerting a greater and greater influence on the rest of the world’s gold markets, the entire global gold market is becoming far less volatile than the Technical picture would have forecast.   

Silver Today –Silver closed at $17.32 yesterday after $17.16 at New York’s close Friday.

LBMA price setting:  The LBMA morning gold price was set today at $1,262.80 from Friday’s $1,265.00.  The gold price in the euro was set at €1,131.03 after Friday’s €1,130.37.

Ahead of the opening of New York the gold price was trading at $1,260.50 and in the euro at €1,128.87. At the same time, the silver price was trading at $17.27. 

Price Drivers

With China still closed today, the main influence on the gold price has been the moves of the dollar and euro. The dollar is stronger today after the E.C.B.’s Draghi made it clear that despite the lift in the economic picture, they felt that it could be temporary, so it was too early to contemplate any form of tightening of the easy money picture in the E.U. Certainly, the E.U. economy is not served well by a strong euro.

We do expect the euro to be volatile and vulnerable in the next few months as the Italian elections approach, likely in September.

Once Shanghai is open again [tomorrow] we expect to see stronger moves in the gold prices. It is only then that we will be able to see if demand there is strong enough to make it through what’s left of resistance. Meanwhile, the influence of London and New York will be to make the gold price consolidate with a negative bias.

Gold ETFs – Friday, 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 remain at 847.452 tonnes and at 202.82 tonnes respectively.

 

Since January 6th 2017 38.678 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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