Gold and silver: Mood changing for the better

Gold Today –New York closed yesterday at $1,228.40. London opened at $1,230.00 today. 

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

         The $: € was weaker at $1.1457 after yesterday’s $1.1402: €1.

         The Dollar index was weak at 95.21 after Friday’s 95.75

         The Yen was stronger at 112.44 after Friday’s 113.03:$1. 

         The Yuan was stronger at 6.7704 after Friday’s 6.7821: $1. 

         The Pound Sterling was stronger at $1.30.66 after Friday’s $1.2927: £1.

Yuan Gold Fix
Trade Date     Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    7    17

     2017    7    13           

     2017    7    12

SHAU

SHAU

SHAU

/

267.54

268.39

Trading at 270.30

267.99

268.58

$ equivalent 1oz at 0.995 fineness

@    $1: 6.7704

       $1: 6.7821

       $1: 6.7995     

  /

$1,221.97

$1,222.72

Trading at $1,236.77

$1,224.03

$1,223.59

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 rose higher than Shanghai’s close on Friday, with a premium to Shanghai of $4.40 with London opening today at a discount to Shanghai’s trading today of $6.77, a marginally lower discount to Shanghai than we saw on Friday. We see this difference between London and New York because London is the western world’s center of physical dealing and New York a financial market not a physical gold market.

With the dollar weakening to dangerously low levels on the index, we are on the brink of a dollar ‘bear’ market  while, after  strong economic growth of 6.9% for the last month, the Yuan is strengthening [with a little help from the P.B. of C.] But the fall of the dollar is against all currencies.

Silver Today –Silver closed at $15.95 Friday after $15.92 at New York’s close Thursday.

LBMA price setting:  The LBMA gold price was set today at $1,229.85 from Friday’s $1,221.40.  The gold price in the euro was set at €1,072.70 after Friday’s €1.071.03.

Ahead of the opening of New York the gold price was trading at $1,234.85 and in the euro at €1,076.73. At the same time, the silver price was trading at $16.16. 

Price Drivers

At the moment gold continues to see a rebound after its fall from $1,250. We would expect more of that today. This is despite the ongoing selling from the SPDR gold ETF on Friday. What does this tell us about U.S. gold investors ‘net’ opinions? It tells us that the view of U.S. investors continues to see gold as falling after the rebound, but dealer’s opinions are different in the shorter term as they lifted prices higher.

The Fed

Janet Yellen’s comments Friday were followed by the publication of the latest CPI numbers which showed that the belief that the poor data, issued on Friday, which led the Fed to say it was a temporary setback, looks like turning out to be more permanent. With this in mind and indeed if this proves to be so, we may not see another rate hike in 2017. Equity markets have not yet discounted this, but it is being reflected in the dollar’s exchange rate. Once it is factored in, we expect more ‘bubble’ rises in U.S. equities [albeit against better earnings results from the corporate sector] as the prospect of better yields in these markets, for much longer, attracts funds.

ECB

Meanwhile the markets are discounting an earlier unwinding of stimulus from the E.C.B. boosting prospects in Europe likely ahead of those we see in the U.S.

We see all of the above as a changing of the mood in financial markets. The dollar is getting to dangerous levels in its weakness, as Chinese demand rises alongside a robust economy continuously bringing the new rich into the gold market on an ongoing basis.  Expectations in the E.U. and China are getting stronger [for the euro as well] and are getting weaker in the U.S.A. They are now affecting foreign exchange markets directly and, by extension, the gold market. You saw the strength of the euro reflected in the earlier, almost unchanged euro gold price. But ahead of the opening of New York, we saw the euro gold price begin to rise too.

We are around six weeks away from the start of the ‘gold season’ so the time in which the bears can attack is reducing by the day.

Gold ETFs

Friday saw sales of 3.549 tonnes from the SPDR gold ETF but no change in  the holdings of the Gold Trust. The SPDR gold ETF and Gold Trust holdings are at 828.842 tonnes and at 211.41 tonnes respectively.

Since January 6th 2017 27.838 tonnes have been added to the SPDR gold ETF and the Gold Trust.

Julian D.W. Phillips 

GoldForecaster.com | StockBridge Management Alliance 

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