North Korea tensions diminish: dollar rises, gold falls

Gold Today –New York closed yesterday at $1,282.00. London opened at $1,272.75 today. 

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

         The $: € was stronger at $1.1740 after the yesterday’s $1.1799: €1.

         The Dollar index was stronger at 93.73 after yesterday’s 93.33

         The Yen was weaker at 110.33 after yesterday’s 109.76:$1. 

         The Yuan was weaker at 6.6792 after yesterday’s 6.6691: $1. 

         The Pound Sterling was weaker at $1.2957 after yesterday’s $1.2995: £1

Yuan Gold Fix
Trade Date     Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    8    15

     2017    8    14           

     2017    8    11







Trading at 275.4



$ equivalent 1oz at 0.995 fineness

@   $1: 6.6792

       $1: 6.6691

       $1: 6.6672     




Trading at $1,277.47



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 $4.53 higher than Shanghai’s close yesterday. Then today sees Shanghai dropping the gold price just before London opened, which lead to London’s prices being lower as the dollar corrected higher, in its falling patter. Shanghai is leading the way down, but following a stronger dollar as it adjusts to dollar gold prices.

Silver Today –Silver closed at $17.07 yesterday after $17.06 at New York’s close Friday.

LBMA price setting:  The LBMA gold price was set this morning at $1,274.60 from yesterday’s $1,281.10.  The gold price in the euro was set at €1,084.67 after yesterday’s €1,085.869.

Just before the opening of New York the gold price was trading at $1,273.00 and in the euro at €1,084.65. At the same time, the silver price was trading at $16.80. 

Price Drivers

All told, this was simply a day when the gold price barely moved in the euro but fell in the dollar as the dollar corrected higher before its next downward turn.

Now we have something definitive, but we are suspicious of the statement, “Kim Jong Un, the leader of North Korea, said he would wait to see what the US does next before he decides whether or not to fire a missile towards Guam, according to state media. Today’s statement from North Korea, coming after more conciliatory tone from the US administration yesterday, has de-escalated the threat of conflict and reassure investors after a nervous few days. But how long will this last? Putting oneself in his shoes with his posture that he is the one threatened by the U.S. [which is why he is waiting for the U.S. to act], we see he may have kept his defensive posture. This does not mean he will not fire more missiles and confirm North Korea has a nuclear bomb! The question now becomes, “Will President Trump attack if the tests continue, which we expect them to?” We see therefore, at best, that the threat has been postponed for an undetermined period of time. This postpones the North Korean situation as a factor in the gold price.

Meanwhile, the gold price has fallen in dollar terms in line with the rise of the dollar. We confirm the dollar remains in a bear market, so we expect this correction to be followed by a continuation of its fall to new lows. This will drive gold higher in dollar terms.

Gold ETFs – Yesterday there were purchases of 4.139 tonnes into the SPDR gold ETF but no change in the Gold Trust yesterday. The SPDR gold ETF and Gold Trust holdings are at 791.008 tonnes and at 213.28 tonnes respectively. While these purchases were substantial, they had no effect on the gold price. They would have to be persistent or larger than this.

 Julian D.W. Phillips | StockBridge Management Alliance 

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