Gold falls below support. Indian gold sees strength.

Gold Today –New York closed at $1,269.50 yesterday after closing at $1,263.80 Tuesday. London opened at $1,264.40 today. 

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

         The $: € was weaker at $1.0892 after yesterday’s $1.0877: €1.

         The Dollar index was weaker at 99.01 after yesterday’s 99.19

         The Yen was stronger at 111.30 after yesterday’s 111.47:$1. 

         The Yuan was weaker at 6.8940 after yesterday’s 6.8907: $1. 

         The Pound Sterling was stronger at $1.2900 after yesterday’s $1.2815: £1.

Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    4    27

     2017    4    26

     2017    4    25

SHAU

SHAU

SHAU

/

282.31

283.54

/

282.17

283.39

$ equivalent 1oz @    $1: 6.8940

       $1: 6.8907

       $1: 6.8862

      

  /

$1,274.30

$1,280.69

/

$1,273.67

$1,280.01

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 283.00 towards the close today. This translates into $1,272.42. New York closed at a $2.92 discount to Shanghai’s close yesterday. London opened at a discount of $8.02 to Shanghai’s close today.

While Shanghai’s gold prices continue to slip, New York took prices up to the level of Shanghai’s close yesterday [Take $5 off Shanghai prices in the table to see that, to account for the difference in the quality of gold being priced] but London pulled prices back at its opening.

LBMA price setting:  The LBMA gold price was set today at $1,264.30 from yesterday’s $1,264.95.  

The gold price in the euro was set at €1,159.38 after yesterday’s €1,162.96.

Ahead of the opening of New York the gold price was trading at $1,265.30 and in the euro at €1,162.53. At the same time, the silver price was trading at $17.43. 

Silver Today –Silver closed at $17.49 yesterday after $17.63 at New York’s close Tuesday. Silver is falling much faster than gold. As the silver price primarily reflects the U.S. silver market their price is certainly pointing downwards. If gold does not follow you can be sure that there will be a strong bounce soon. But if gold does break down, the silver price may well not fall as far.

Price Drivers

The gold price did not break down in New York yesterday but recovered to very close to Shanghai’s close yesterday.

There were no sales or purchases into or from the U.S. based gold ETFs, so there was no market reason for the rise and that rise dissipated in London.

The big event in the U.S. was the publication of the new U.S. Tax Code proposed by the Trump administration. While it was in line with his election promises, it has a long way to go before it is law. The market barely reacted to the event. There are doubts as to whether it will pay for itself as it relies on creating growth to generate additional income on which a similar amount of tax revenue will be achieved as is achieved today. Trump’s target is to also create ‘millions of jobs’ through such measures. As Bloomberg put it in an article yesterday, extra capital injections from richer companies could lead to loss of jobs as robots replace labor. This is happening and there are no proposals to find labor other permanent jobs.  Thus the President’s election promises are becoming more difficult to achieve by the day. That’s if they can be put into law.  

The second main event is that the NAFTA treaty will not be scrapped, but renegotiated. The election promises of scrapping it would have destroyed potentially millions of jobs, so Trump is having to be more pragmatic by the day. Such is reality.

The impact on the gold price was neutral. It was the weaker dollar that boosted gold in the U.S. slightly. But even there, the gold price has been slipping with a weak dollar the opposite of its usual behavior.

India

Akshaya Tritiya happens tomorrow in India. The market in India expects around 20-30% increase in demand during Akshaya Tritiya, compared to last year. This is because it is happening in the wedding season. It is clear that the new Rupee notes are now sufficient to completely replace the old notes. Add to that the stronger Rupee that has lowered the gold price to bargain prices for Indian buyers, in Rupees.

It may also be that the proposed 3% GST tax will bring forward more buying. What’s for sure is that the smugglers will be delighted with such a new tax, taking their potential income to double figures then. We have no doubt that in India smugglers now supply a major portion of gold supply.

Gold ETFs – Yesterday saw no sales or purchases in the two major U.S. gold ETFs after a sale of 5.921 tonnes out of the SPDR gold ETF (GLD) a day earlier but no change in the iShares Gold Trust (IAU). Their holdings are now at 854.25 tonnes and at 204.36 tonnes respectively.

Since January 6th 2017 47.20 tonnes have been added to the SPDR gold ETF and the Gold Trust.

Julian D.W. Phillips 

 GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

Dollar stays weak but gold and silver weaker too

Gold Today –New York closed at $1,276.10 yesterday after closing at $1,279.20 Friday. London opened at $1,270.40 today. 

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

         The $: € was weaker at $1.0895 after yesterday’s $1.0843: €1.

         The Dollar index was weaker at 98.98 after yesterday’s 99.18

         The Yen was weaker at 110.48 after yesterday’s 110.108:$1. 

         The Yuan was barely changed at 6.8862 after yesterday’s 6.8865: $1. 

         The Pound Sterling was stronger at $1.2814 after Friday’s $1.2787: £1.

Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    4    25

     2017    4    24

     2017    4    21    

SHAU

SHAU

SHAU

/

284.46

285.10

/

283.49

285.11

$ equivalent 1oz @    $1: 6.8862

       $1: 6.8865

       $1: 6.8867

      

  /

$1,284.79

$1,287.64

/

$1,280.41

$1,287.69

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 283.90 towards the close today. This translates into $1,277.31. New York closed at a $0.69 premium to Shanghai’s close yesterday. London opened at a discount of $6.91 to Shanghai.

Despite New York trying to lift gold prices, Shanghai’s gold prices are slipping lower now. London is taking gold prices further down too.

Please note just how stable the Yuan exchange rate is against the dollar. This is in line with the policy of the People’s Bank of China’s as stated last week that they will not let the Yuan weaken significantly in the future.

The policy of the PBoC against speculation has now been extended to the equity markets. The application of this new policy caused the Shanghai equity market to fall back heavily. But once it has found its new non-leveraged floor it will be far more stable. As you can see the PBoC is not tolerating speculative pressures on the financial markets, unlike the developed world. The main speculators in the west are the banks, but in China these institutions are firmly under the control of the central bank. The overall impact on all financial markets will be to decrease volatility tremendously. The equity market in China, in the last few years has been more of a casino than a responsible financial market. This has deterred the retail market from investing into the market. We reiterate that the Shanghai gold exchange will see a far more stable market than has been the case to date and will bring that stability to the gold price globally.

LBMA price setting:  The LBMA gold price was set today at $1,270.50 from yesterday’s $1,271.80.  

The gold price in the euro was set at €1,167.95 after yesterday’s €1,171.84.

Ahead of the opening of New York the gold price was trading at $1,268.10 and in the euro at €1,163.98. At the same time, the silver price was trading at $17.77. 

Silver Today –Silver closed at $17.92 yesterday after $17.96 at New York’s close Friday.

 Price Drivers

The dollar index continues to weaken taking gold down with it in dollar terms while falling much faster in the euro. But the gold price has not yet broken down through support, while still consolidating.

Before London opened gold prices were marked down, not traded down, roughly in line with Shanghai’s fall.

With the dollar weaker we would have expected gold prices to rise but so far, London has not led the way, will New York? If so it is taking its time. We would expect speculators to try to push prices down on the back of a seemingly more secure E.U. in New York.

But we would be cautious enough to say that a convincing break down through support is needed for the positive gold picture to be changed.

Gold ETFs – Yesterday saw purchases of 1.481 tonnes into the SPDR gold ETF but no change in the Gold Trust. Their holdings are now at 860.171 tonnes and at 204.36 tonnes respectively.

Julian D.W. Phillips 

 GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

French result hammers gold and silver

Gold Today –New York closed at $1,285.90 Friday after closing at $1,279.20 Thursday. London opened at $1,271.20 today. 

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

         The $: € was significantly weaker at $1.0843 after Friday’s $1.0695: €1.

         The Dollar index was weaker at 99.18 after Friday’s 99.94

         The Yen was weaker at 110.108 after Friday’s 109.18:$1. 

         The Yuan was barely changed at 6.8865 after Friday’s 6.8867: $1. 

         The Pound Sterling was weaker at $1.2787 after Friday’s $1.2833: £1.

Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    4    24

     2017    4    21

     2017    4    20    

SHAU

SHAU

SHAU

/

285.10

285.30

/

285.11

285.23

$ equivalent 1oz @    $1: 6.8865

       $1: 6.8867

       $1: 6.8837

      

  /

$1,287.64

$1,289.11

/

$1,287.69

$1,288.79

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 285.00 towards the close today. This translates into $1,282.23. New York closed at a $3.67 premium to Shanghai’s Friday close. London opened at a discount of $11.03 after hearing the results of the French elections.

As you can see Shanghai has been remarkably stable over the last few days as the international scene has produced a lot of action. Over the weekend the Chinese government has pressured North Korea to abandon its nuclear programs. This removes the chance of a U.S. China confrontation and war. The consequences of a renewed North-South Korean war would need a major incident to trigger it. Will it happen?

Before London fell gold prices were marked down, not traded down by $13.00. We would expect these prices to recover when real dealing begins. But so far London has not led the way, Will New York?

LBMA price setting:  The LBMA gold price was set today at $1,271.80 from Friday’s $1,281.50.  

The gold price in the euro was set at €1,171.84 after Friday’s €1,198.00.

Ahead of the opening of New York the gold price was trading at $1,270.25 and in the euro at €1,171.10. At the same time, the silver price was trading at $17.80. 

Silver Today –Silver closed at $18.96 Friday after $18.01 at New York’s close Thursday, but dropped sharply on the French election result.

Price Drivers

The dollar index is weaker primarily against the euro, on the Macron victory in France.  Technically gold is sitting on support, while still consolidating.

Jack Mar on Artificial intelligence

Jack Mar of Alibaba, has been the first high profile person to state an obvious regarding artificial intelligence solutions and robotics impacting the workforce.  That has been going on for decades now and is capable of producing major social shocks in the future. We have reported that this could cost the world 50% of jobs. No nation will escape this trend. In history [France, Russia] the impoverishment of the people was responsible for revolutions. Certainly the world is unprepared for such events.  Gold will benefit from the coming disruptions.

Trump Tax reform

President Trump has announced that on Wednesday the principles of his Tax Reformation will be unveiled. This is needed to bolster his political momentum, which has faltered since his failure to repeal Obamacare. The reformation will only be implemented in a few months, though.

France

The Macron victory with Marine le Pen in the run-off in two weeks time is being read as Macron will be President. The parties that were defeated told their supporters to support Macron. This takes France leaving the Eurozone and the euro off the table. But amazingly Macron does not have a political party behind him. So his effectiveness is by no means certain.

Marine Le Pen is for leaving the E.U. and euro. If we are right and whether or not France might leave the E.U. is the fundamental issue, Macron will be President, which is why the euro is strong and a great deal of fear of the breakup of the E.U. is off the table. It does not make the E.U. strong, but it does keep the status quo. The E.U. continues to remain weak in its structure. Italy, for instance is more than capable of leaving the E.U. with its current problems.

Gold ETFs – Friday saw purchases of 4.44 tonnes into the SPDR gold ETF but no change in the Gold Trust. Their holdings are now at 858.69 tonnes and at 204.36 tonnes respectively.

Since January 4th 2016, 261.696 tonnes of gold have been added to the SPDR gold ETF and to the Gold Trust.  Since January 6th 2017 51.64 tonnes have been added to the SPDR gold ETF and the Gold Trust.

Julian D.W. Phillips 

 GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

Largish sale from GLD but gold price still consolidating

 Gold Today –New York closed at $1,281.20 yesterday after closing at $1,279.20 Wednesday. London opened at $1,281.00 today. 

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

         The $: € was stronger at $1.0695 after yesterday’s $1.0766: €1.

         The Dollar index was stronger at 99.94 after yesterday’s 99.46

         The Yen was weaker at 109.18 after yesterday’s 109.03:$1. 

         The Yuan was weaker at 6.8867 after yesterday’s 6.8837: $1. 

         The Pound Sterling was weaker at $1.2787 after yesterday’s $1.2833: £1.

Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    4    21

     2017    4    20

     2017    4    19    

SHAU

SHAU

SHAU

/

285.30

286.11

/

285.23

285.75

$ equivalent 1oz @    $1: 6.8867

       $1: 6.8837

       $1: 6.8854

      

  /

$1,289.11

$1,292.45

/

$1,288.79

$1,290.8

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 285.10 towards the close today. This translates into $1,282.64.

All three global gold markets are in line with each other. At this moment in time, we don’t see that the three are leading or following each other, but the closeness of prices tells us that arbitrageurs are doing a very professional job of smoothing out the gold markets across the world. New York closed $1.44 below Shanghai’s closing yesterday and today. London opened at a $1.46 discount to Shanghai in line with New York. This is the closest we have ever seen them.

LBMA price setting:  The LBMA a.m. gold price was set today at $1,281.50 from yesterday’s $1,279.90.  

The gold price in the euro was set at €1,198.00 after yesterday’s €1,191.05.

Ahead of the opening of New York the gold price was trading at $1,284.15 and in the euro at €1,200.59. At the same time, the silver price was trading at $17.99. 

Silver Today –Silver closed at $18.01 yesterday after $18.14 at New York’s close Wednesday.

 Price Drivers

The dollar is recovering against other currencies today with gold rising in the dollar. Technically gold is sitting on support, while still consolidating.

France

With the French elections taking place this weekend, after another terror attack the mood in the world remains dark. The French polls are reminding us of the polls before the U.S. election, so we do not rate their abilities too highly. There is always a danger that we get so used to the dark side of the world that it becomes a ‘new normal’ but we do expect such attacks [in Paris today] to affect voters in France. Next week could see two euro-skeptics in the run-off for the Presidency.

Expectations too high

Currency markets are behaving in an unpredictable fashion at the moment as are markets.

Equity markets are too high and not for the right reasons as the U.S. recovery is still moderate and not such that gives rise to the current record highs we are seeing. Likewise in Europe with its tentative recovery. The IMF has increased its forecasts for the coming years. We would like to see more reasons and sustainability before endorsing such opinions. There are too many potential events that could disturb such a positive picture. What we do draw from the global scene is that the environment remains positive for gold.

China

When we see China reporting an increasingly robust economy we see a nation that is doing its best to be a separately, self-sustaining economy with supplies coming from countries not under U.S. influence. We do not see the U.S. and China working interdependently with each other in the future. China will walk its own road.

Russia

Russia continues to publicize the gold it buys, with last month’s purchases just below 25 tonnes. We do believe that China continues to build up its reserves in its institutions and through its agencies, but for whatever reason, has decided not to be open about this.

Gold ETFs

Yesterday saw sales of 6.513 tonnes from the SPDR gold ETF but no change in the Gold Trust. Their holdings are now at 854.25 tonnes and at 204.36 tonnes respectively.

Since January 6th 2017 47.20 tonnes have been added to the SPDR gold ETF and the Gold Trust.

Julian D.W. Phillips 

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

Huge gold purchase into GLD fails to boost price

 

 Gold Today –New York closed at $1,279.20 yesterday after closing at $1,290.10 Tuesday. London opened at $1,279.15 today. 

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

         The $: € was weaker at $1.0766 after yesterday’s $1.0724: €1.

         The Dollar index was weaker at 99.46 after yesterday’s 99.66

         The Yen was weaker at 109.03 after yesterday’s 108.99:$1. 

         The Yuan was slightly stronger at 6.8837 after yesterday’s 6.8854: $1. 

         The Pound Sterling was weaker at $1.2833 after yesterday’s $1.2857: £1.

Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    4    20

     2017    4    19

     2017    4    18    

SHAU

SHAU

SHAU

/

286.11

286.04

/

285.75

286.03

$ equivalent 1oz @    $1: 6.8837

       $1: 6.8854

       $1: 6.8847

      

  /

$1,292.45

$1,292.26

/

$1,290.82

$1,292.22

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 285.90 towards the close today. This translates into $1,286.82. While New York and London were pulled lower by Shanghai yesterday and today you will note that Shanghai has barely changed in the last two days.

New York closed $7.62 below Shanghai’s closing yesterday and today. London opened at a $7.67 discount to Shanghai in line with New York.

Shanghai continues to lead the way in the gold markets, barely changing its prices over the last two days, despite very heavy buying in New York into the U.S. based gold ETFs and the dollar weakening. We feel it is important to factor the current dominance of Shanghai’s pricing of gold over that of London and New York.  In line with this, we expect Shanghai to exert an upward pull on New York and London’s prices for the rest of this week.

This pull of Shanghai’s gold prices may grow in the coming months as the Chinese government has now committed itself to a stable Yuan [primarily against the U.S. Dollar.] It has separated broad Capital Controls from individual investment requests to invest overseas. Investments that directly benefit the Chinese economy will continue and remain unaffected by Controls, as permission for non-China benefitting investments which will continue to be refused. Already this is stabilizing the Yuan and will continue to do so as the Chinese economy is now growing on a stable footing, once more. Hence we expect the Yuan to remain at less than 7.00 to the U.S. dollar for the foreseeable future.

LBMA price setting:  The LBMA gold price was set today at $1,279.90 from yesterday’s $1,282.05.  

The gold price in the euro was set at €1,191.05 after yesterday’s €1,195.72.

Ahead of the opening of New York the gold price was trading at $1,278.60 and in the euro at €1,189.73. At the same time, the silver price was trading at $18.20. 

Silver Today –Silver closed at $18.14 yesterday after $18.32 at New York’s close Tuesday.

 Price Drivers

The dollar continues to weaken and U.S. buyers are now piling into the SPDR gold ETF and the Gold Trust and yet the gold price fell in New York. If Shanghai continues to exert pricing power over the gold price as we see now, U.S. physical buying and selling will have a decreasing effect on the gold price. We expect less volatility in gold prices if this comes to be. This is a significant change in the structure of the gold price. We are watching to see if this change becomes permanent or is simply a short term factor.

If we are right, then we expect the gold price to recover in New York and London soon, as the factors that have caused gold prices to rise in the past [a weak dollar and U.S. physical demand] are in place right now.

With the French elections coming up this weekend some believe that the euro is soon to fall. If Marine le Pen is elected to the Presidency in the second round of the elections, the future of the Eurozone will be in doubt. With the Polls indicating that Macron is more likely to pick up the votes of the other two defeated candidates, the prospects of a Le Pen Presidency looks unlikely.

Gold ETFs – Yesterday saw purchases of a huge 11.842 tonnes into the SPDR gold ETF (GLD) and a purchase of 0.9 of a tonne into the Gold Trust (IAU). Their holdings are now at 860.763 tonnes and at 204.36 tonnes respectively.

Since January 6th 2017 53.713 tonnes have been added to the SPDR gold ETF and the Gold Trust.

Julian D.W. Phillips 

 GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

LBMA gold pricing anomaly

It may not have gone unnoticed by readers of lawrieongold that just over a week ago there was a major discrepancy between the LBMA Gold Benchmark price published in London and the prevailing spot gold price at the time.  This should not be able to happen.  In a detailed article, Bloomberg’s Shelley Goldberg describes how this came about and what is being done to avoid it happening again:

Gold Trading Systems Experience Growing Pains

On the afternoon of April 11, London’s daily gold price benchmark fix took a peculiar turn: It was about $12 under the spot price. The auction appeared to be stuck on a descending escalator from an initial $1,265.75, before fixing at $1,252.90.

Such a discrepancy affects many participants in the global gold markets — hedgers and speculators, along with miners, refiners and jewelers, as well as banks and portfolio managers. But there was no mention of fat fingers. The initial reports attempting to explain this anomaly pointed to a new algorithm that U.S.-based Intercontinental Exchange, known as ICE, began using to determine prices, as a replacement for the standard auction chair setting the price………….

To read full article click here

Gold building strength

 Gold Today –New York closed at $1,290.10 yesterday after closing at $1,283.30 Thursday. London opened at $1,283.00 today. 

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

         The $: € was weaker at $1.07.24 after yesterday’s $1.0649: €1.

         The Dollar index was weaker at 99.66 after yesterday’s 100.24

         The Yen was weaker at 108.99 after yesterday’s 108.84:$1. 

         The Yuan was slightly stronger at 6.8854 after yesterday’s 6.8860: $1. 

         The Pound Sterling was stronger at $1.2857 after yesterday’s $1.2590: £1.

Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    4    19

     2017    4    18

     2017    4    13    

SHAU

SHAU

SHAU

/

286.04

287.62

/

286.03

286.48

$ equivalent 1oz @    $1: 6.8854

       $1: 6.8847

       $1: 6.8943

      

  /

$1,292.26

$1,299.40

/

$1,292.22

$1,294.25

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 Yuan 286.00 towards the close today. This translates into $1,286.95. New York closed $3.15 ABOVE Shanghai’s closing. London opened at a $3.95 discount to Shanghai.

Shanghai led the way lower today taking London back to the mid-$1,280 area again. To us this was important as it confirms the price dominance of Shanghai over London. If New York gold prices rise today without any specific news to cause that, then it will be an attempt to reclaim price dominance. If not then Shanghai will show its overall, dominant, pricing power.

LBMA price setting:  The LBMA gold price was set today at $1,282.05 from yesterday’s $1,285.00.  

The gold price in the euro was set at €1,195.72 after yesterday’s €1,203.30.

Ahead of the opening of New York the gold price was trading at $1,285.00 and in the euro at €1,198.01. At the same time, the silver price was trading at $18.27. 

Price Drivers

New York’s gold price climb nearly took the gold price to $1,300, but more work needs to be done to achieve that still. With Shanghai taking the gold price down today, the fear of war has subsided somewhat, but it has not gone away. The gold price did gain some impetus from war fears, holding sellers back and producing small buying of gold. But the gold price still has further to climb in the euro as the dollar weakens against all currencies.

It seems markets are paying attention to President Trump, not the Treasury Secretary on the dollar, after all. Even Goldman Sachs has closed its bullish calls on the dollar. With the dollar index falling back through support, we expect more falls in the dollar.

In China the economy has shown itself to be robust and the Chinese government’s plans to develop a self-sustaining economy within China is meeting with success as it continues to turn from its dependence of exports. But this would not lead to the Chinese selling gold as it would in the U.S. if the economy is burgeoning, no, it is doing the reverse and prompting more gold buying as a wealth protector. We don’t expect to see China allow capital investments outside of the country unless they directly benefit the nation. But they will allow capital out to buy gold.

Gold ETFs – Yesterday saw no purchases or sales of gold into or from the SPDR gold ETF but a purchase of 0.59 of a tonne into the Gold Trust. Their holdings are now at 848.921 tonnes and at 203.46 tonnes respectively.

Julian D.W. Phillips 

 GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

Indian gold demand hitting new highs

 Gold Today –New York closed at $1,283.80 yesterday after closing at $1,281.50 Thursday. London opened at $1,286.00 today. 

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

         The $: € was slightly weaker at $1.0649 after Thursday’s $1.0646: €1.

         The Dollar index was slightly stronger at 100.26 after Thursday’s 100.24

         The Yen was slightly stronger at 108.84 after Thursday’s 108.99:$1. 

         The Yuan was slightly stronger at 6.8860 after Thursday’s 6.8847: $1. 

         The Pound Sterling was stronger at $1.2590 after Thursday’s $1.2559: £1.

Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    4    18

     2017    4    13

     2017    4    12    

SHAU

SHAU

SHAU

/

287.62

285.25

/

286.48

284.53

$ equivalent 1oz @    $1: 6.8860

       $1: 6.8847

       $1: 6.8943

      

  /

$1,299.4

$1,286.90

/

$1,294,25

$1,283.65

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 Y286.00 towards the close today.

This translates into $1,286.84. New York closed $3.04 below Shanghai’s closing. London opened at a $0.00 discount to Shanghai. This left all three markets almost in line with each other, which is further testament to the ability of arbitrageurs to smooth out market differences. This is the first time we have seen a zero discount to London prices. It tells us that the gold price is going higher soon!

Shanghai nearly hit $1,300 yesterday on the fear of an outbreak of war between North Korea and the U.S. The use of North Korean artillery to hit Seoul in South Korea made even the Chinese chase gold higher. The presence of the U.S. in North Korea is totally unacceptable to China. The fear of that has not gone away, as the North Koreans simply failed to launch a missile. They will try again.

LBMA price setting:  The LBMA gold price was set today at $1,285.00 from Thursday’s $1,286.10.  

The gold price in the euro was set at €1,203.3 after yesterday’s €1,208.40.

Ahead of the opening of New York the gold price was trading at $1,285.05 and in the euro at €1,203.29. At the same time, the silver price was trading at $18.40. 

Silver Today –Silver closed at $18.41 yesterday after $18.43 at New York’s close Thursday.

Price Drivers

North Korea

President Trump has made a fortune in his days before the presidency from his decisiveness, his confrontational negotiating abilities and from his dominant personality. We are seeing these traits being used in his international dealings. The North Korean situation is already seeing his personality in action. But this time, the brinkmanship is capable of taking the U.S. into a war that could be at best a repeat of the 1952 war. That drew in China fully.

But this time the U.S. would not take on an undeveloped China, but the world’s second largest economy and an almost developed China at that. Such a war is likely to become far bigger in Asia than Vietnam both in scope and size. Will this be part of “Making America Great Again?” What is for sure is that the gold price will soar, if an outbreak of violence takes place.

As you can see U.S. gold investors are picking up their purchases into gold ETFs both because of this threat and because U.S. buyers buy on the rise. After Trump said the ‘Dollar was too strong’, the Treasury Secretary said a strong dollar is good.  So, who’s in charge?

India

India’s gold imports saw a big rise between January and March 2017, with total imports for the period hitting 230 tonnes. That excludes gold smuggled into the country, which we believe could be much more.

To put that in perspective, for the seven months between April to October 2016, gold imports totaled just 264 tonnes. In fact, imports for the Jan-Mar 2017 quarter were the strongest for those months since 2013.If this keeps up we will see 1,000 tonnes imported for the year and far higher if we could include smuggled gold.

As we reported last year the government/Reserve Bank of India would need all the time between November and May to replace all the old non-legal tender banknotes with new ones. This process is now just about complete and Indian are buying gold heavily again. It is clear that many Indians who opened bank accounts in which to deposit the old notes could well be withdrawing their funds and returning back to cash dealings. We see this as the attempted crackdown on the “Black Money” alternative financial system in the country, has failed.

With the marriage season underway and a major festival soon to happen, Indian gold demand is hitting new highs.

Gold ETFs – Yesterday saw purchases of 6.841 tonnes into the SPDR gold ETF and a purchase of 1.2 tonnes into the Gold Trust. Their holdings are now at 848.921 tonnes and at 202.87 tonnes respectively.

Since January 4th 2016, 250.437 tonnes of gold have been added to the SPDR gold ETF and to the Gold Trust.  Since January 6th 2017 40.381 tonnes have been added to the SPDR gold ETF and the Gold  Julian D.W. Phillips 

 GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

Gold: Ascending top breakout confirmed

Gold Today –New York closed at $1,272.60 yesterday after closing at $1,254.30 Monday. London opened at $1,273.4 today. 

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

         The $: € was weaker at $1.0621 after yesterday’s $1.0608: €1.

         The Dollar index was weaker at 100.61 after yesterday’s 100.90

         The Yen was stronger at 109.70 after yesterday’s 110.66:$1. 

         The Yuan was stronger at 6.8943 after yesterday’s 6.9012: $1. 

         The Pound Sterling was stronger at $1.2497 after yesterday’s $1.2416: £1.

Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    4    12

     2017    4    11

     2017    4    10    

SHAU

SHAU

SHAU

/

281.14

280.96

/

281.53

281.52

$ equivalent 1oz @    $1: 6.8943

       $1: 6.9012

       $1: 6.9019

      

  /

$1,267.09

$1,266.28

/

$1,268.85

$1,268.67

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 284.30 towards the close today.

This translates into $1,277.61. New York is trading at a $5.01 discount to Shanghai and London opened at a $4.21 discount to Shanghai.

With the New York close $9 higher than Shanghai’s opening today Shanghai had to chase gold prices higher. Likewise London had to lift prices strongly at the opening or risk arbitrageurs moving into buy heavily. It may have been either the Chinese ICBC or the global HSBC that took what stock they could off the market before the London opening to even out London’s prices with Shanghai.

LBMA price setting:  The LBMA gold price was set today at $1,272.30 from yesterday’s $1,255.70.  

The gold price in the euro was set at €1,199.94 after yesterday’s €1,183.28.

Ahead of the opening of New York the gold price was trading at $1,275.50 and in the euro at €1,203.53. At the same time, the silver price was trading at $18.33. 

Silver Today –Silver closed at $18.28 yesterday after $17.94 at New York’s close Monday.

Price Drivers

We were wrong about more consolidation yesterday. Consolidation is a very difficult process to gauge accurately in terms of timing. It is a process of demand matching supply to the point where a small sale or purchase can make the next move a strong one. We did not realize that this point was reached yesterday, suddenly. After all it has been several weeks since the gold price has been building up sufficient strength to effectively tackle overhead resistance at $1,260, the 200-day average. Yesterday saw it do so, when an ascending top breakout was confirmed technically.

The global political scene was turned combative by Trump’s tweet that North Korea is looking for trouble. After Trump’s punitive strike in Syria, it seems plausible that he is capable of doing the same in North Korea.  Safe haven assets are now in play. These include the Japanese Yen, a haven that will be fought by Japan’s central bank, which we expect will intervene in the exchange rate now. This brings gold center stage alongside the less international silver.

The dollar is weaker, but not so much against the euro to make the upward move a dollar play, as the euro price of gold hits 1,200.  U.S. gold investors came in with a large, but not huge, set of purchases into the U.S. based gold ETFs, but this was sufficient to break through overhead resistance.

India

Gold imports by India jumped in March from a year earlier as jewelers stocked up anticipating a demand recovery during the wedding season that began this month and the Akshaya Tritiya festival. Shipments advanced 582.5% to 120.8 metric tons last month from a year earlier. Buying should rise heading into Akshaya Tritiya that falls toward the end of April this year. The availability of new banknotes is reaching the level of the old now illegal tender notes to ‘normal levels in May.

Gold refiners continue to work 24/6 to meet Indian and Chinese demand.

Gold ETFs – Monday saw purchases of 1.77 tonnes of a tonne into the SPDR gold ETF (GLD). Yesterday another 3.88 tonnes were taken into GLD.  The Gold Trust (IAU) a purchase of 1.o5 tonnes yesterday. Their holdings are now at 842.41 tonnes and at 201.67 tonnes.

 Julian D.W. Phillips 

 GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

BLANCHARD: Gold prices skyrocket on geopolitical uncertainties.  More gains to come?

Gold prices have skyrocketed to a five-month high above $1,270 in the wake of geopolitical uncertainty in the Middle East and after the Labor Department issued a lower-than-anticipated jobs report in March, and analysts at Blanchard and Company say they expect more gains for precious metals on the horizon.

“Gold’s price action following the missile attack on Syria was a traditional flight-to-safety move, and the jobs report only accentuated some of the weakness in the economy that has been overshadowed by post-election equities enthusiasm,” said Blanchard and Company President & CEO David Beahm. “With uncertainty around President’s Trumps policy toward Syria going forward, gold should benefit from safe-haven buying.”

Beahm said safe-haven buying and ideas that the weak jobs report could delay or slow future Fed interest rate hikes propelled the price of gold to a five month high, and rising geopolitical uncertainty and concerns about cracks in the economic picture have created fresh investor appetite for gold. Increasing tensions with North Korea and upcoming French elections are also boosting gold demand.

A potential conflict with Russia in the Syrian matter is another factor that could impact the price of gold to the upside, Beahm added. On Friday, Russian President Vladimir Putin called the missile strike against Syria “an act of aggression against a sovereign state delivered in violation of international law under a far-fetched pretext.” Russia also initiated an emergency meeting of the United Nations Security Council to discuss the incident, and on Friday afternoon it was reported that Russian warships were steaming toward the U.S. Navy warships that launched the Syrian attack.

“Last July, gold prices traded as high as the $1,390 an ounce, and precious metals traders are monitoring the $1,265 an ounce level closely,” Beahm said. “Sustained strength above that zone could be the signal for another strong rally wave in gold with the $1,300 level as the next bullish chart objective. Blanchard wouldn’t be surprised if we see this level in the near term with so much geopolitical uncertainty and no clear U.S. policy being articulated.”

 

Marc Faber: Euro to Strengthen, Dollar to Weaken, Gold & Emerging Markets to Outperform

Transcript from interview with Marc Faber by Mike Gleason of www.moneymetals.com

Mike Gleason: It is my privilege now to be joined by a man who needs little introduction, Marc Faber, editor and publisher of The Gloom, Boom and Doom Report. Dr. Faber has been a long-time guest on financial shows throughout the world and is a well-known Austrian school economist and an investment advisor and it’s a tremendous honor to have him on with us today.

Dr. Faber, thank you so much for joining us again and how are you?

Marc Faber: My pleasure, thank you.

Mike Gleason: Well, to start out here Dr. Faber, before we get into some other stuff I wanted to hear your comments on the state of the U.S. economy. Now, it appears the Federal Reserve has finally gotten serious about moving rates higher at least modestly. U.S. equity markets seem to be discounting that fact, focusing instead on the so called Trump trade. Markets are pricing in a huge infrastructure spending program and tax cuts stimulates that could overwhelm any modest tightening at the Fed. Now that efforts to reform healthcare seem to be failing we expected some of the optimism surrounding president Trump’s other initiatives would leak out of the stock market but so far that hasn’t happened.

Stocks remain near record highs and there isn’t a whole lot of interest in safe haven assets including precious metals. So what are your thoughts here Marc? Is now a time to take some profits and move towards safety or is there still some good upside in equities?

Marc Faber: Well, I think that in terms of the economy I don’t think the economy is as strong as people believe or as the statistics would show and recent trends have rather been indicating some weakness is auto sales, not a particularly strong housing market and we have several problems as a result of excessive credit. So I think that the economy is not going to do as well as people expect and concerning the huge infrastructure expenditure that Mr. Trump has been talking about, it is about a trillion dollars over ten years, maximum. In other words a hundred billion a year.

In China in 2016 in the first ten months the infrastructure expenditures were 1.6 trillion, in other words 16 times higher than what Mr. Trump is proposing. So just to put this in a perspective. Now throughout Asia and the emerging world there will be a lot of infrastructural expenditures in the years to come. The question is will stocks go up because of that, maybe some stocks will go up and some will not. So we have to be now increasing the selective in what we purchase in terms of equities. My sense is that the economy in the U.S. is weakening and not strengthening.

Mike Gleason: It is also possible markets aren’t responding to fundamentals and we ought to consider those ramifications. The advent of high frequency trading and massive intervention by central bankers could mean markets become more irrational than ever. It is possible for instance to see stock prices being bid higher despite slowing GDP growth, rising interest rates and congress failing to deliver fiscal stimulus here in the U.S. I mean, how artificial do you think markets are and to the extent today’s markets aren’t real, how much long will the central planners and bankers be able to maintain this illusion that they’ve created?

Marc Faber: Well, basically some people say that the central banks are out of bullets. This is not my impression. They can keep on printing money and boost asset prices where by not all asset prices will go up, some will go up and some will go down. But the point I want to make is the central banks are not really out of bullets. The economy, if it weakens some stocks will outperform others, in other words recently you’ve seen the weaker in automobile stocks, so there is still a selective process in the market. The stocks that have gone up the most recently are actually mostly companies with very little earnings, very high evaluations, Tesla, Amazon, Netflix and so forth and we’ll have to see.

All I can say is when I look around the world, I don’t see any particularly good values in the U.S. except in mining companies and I think some of the interest rate sensitive stocks are again relatively attractive because I expect the economy to disappoint, especially if the Fed continues to increase interest rates and so a short increase in interest rates could mean some further weakness in bond prices but eventually bond prices could rally again and this is my view that the U.S. by any standards compared to historical evaluations, compared to Europe, compared to Asia, compared to emerging markets the U.S. is very expensive. Now, can it go up another ten percent? Maybe 20 percent? Yes, between December 1999 and 2000 March 21 when the stock markets peaked out the Nasdaq was up more than 30 percent, but was it a good buy? No, everybody who bought at the time in the first three months of 2000 lost money.

So, my sense is that yeah people can buy stocks here but most of them are going lose money with the exception in my view, that mining stocks will perform reasonably well.

Mike Gleason: Let’s shift focus now and talk about what is happening elsewhere in the world, you’ve alluded to it in prior answers but you’re originally from Europe and now you live in Asia. Now, it’s easy for Americans to focus on domestic affairs such as the new president and lose track of important developments in other parts of the world. Can you update our listeners on developments you are watching in Asia? China in particular.

Marc Faber: Well, whether it’s sustainable or not the fact is that the Chinese economy has been improving recently, somewhat. Maybe it’s all driven by credit but for now they have stabilized the economy, it’s improving and it has had a huge impact on the prices on resources including copper and zinc and nickel and so forth and it has had a favorable impact on the Asian market. Earlier you asked me about the U.S… this whole euphoria about the performance of U.S. stocks, the fact is in Asia just about every market has outperformed the U.S. In Europe just about every market has outperformed the U.S. measured in U.S. dollar terms. So, I think that the impact of an improving Chinese economy is being felt more in other emerging economies than say, in the United States.

Mike Gleason: How about Europe? The future of the European Union is in question with some important elections upcoming, banks there remain at risk and several if not most countries continue to struggle with slow growth and overwhelming debts. Give us your thoughts on Europe and how things might unfold there over the remainder of the year.

Marc Faber:Well, I’ve just written two reports recently highlighting that in Europe there are some companies, mostly utilities and infrastructure related companies that on a valuation screen appear relatively attractive. They have dividend yields of between four and six percent, the Euro is weak or has been weak and is at the low level and these yields of four to six percent are very attractive considering the bonds yield in Europe. And so I think that this year European stocks and especially the stock I mentioned, infrastructure plays, utilities and also food (stocks) will way out perform the U.S. I also happen to think that there will be more and more American companies and foreign companies that will be interested to acquire European companies.

Mike Gleason: How about the geopolitical side, I know many of those nations over there the people are watching what happens with Brexit and have watched what’s taken place there. France, the Netherlands, some other nations have some important votes coming up. What do you make with everything that’s happened there with the state of the European union and how those votes might go as we go throughout the year and see some of these important elections come to fruition.

Marc Faber: Well, this is the big question and we all don’t know exactly what the answer is. My sense is that the Euro will stay and if some weak countries decide to leave the Eurozone, their currencies will be obviously punished. And if some weak countries decide to leave the Eurozone, I think the euro will strengthen. It’s just that if Italy decides to leave the Eurozone, the euro will strengthen but obviously, the new currency (of Italy) will weaken. And so, I think that this Is not a big concern for me.

Furthermore, with the euro having declined so much against the U.S. dollar, if there is further weakness in euro, European stocks will adjust on the upside and foreign companies from Asia… China, Japan and the U.S. will increasingly acquire European companies and European assets.

Mike Gleason: Gold is often referred to as the anti-dollar, if we see the euro strengthen and last as a currency, does that then weigh heavily on the U.S. dollar and might we see gold spike as a result of that because the dollar finally is starting to weaken a little bit?

Marc Faber: Yes, I mean the consensus was, at the beginning of the year that the only game in town are U.S. stocks and the U.S. dollar. I don’t believe that the U.S. dollar is structurally a strong currency. Now can it stay high as it’s rallied a lot against the euro but at this level, I don’t think that the U.S. is very competitive. So, my sense would be the U.S. dollar is vulnerable as well as asset prices in the U.S. both.

Mike Gleason: Dr. Faber, do you see the tide changing world wide when it comes to the importance of gold ownership? We know Asians are buying it relentlessly and so are folks in Europe, maybe that mindset hasn’t made its way to the U.S. yet, but do you sense that may be coming? And once it does do you foresee any problems with being able to get physical metal once the masses, especially in the western world, wake up to the idea that they ought to own some?

Marc Faber: Well, the gold market is very interesting because it consists of a very limited number of people who are “gold bugs” as they call them. And these are people that will accumulate gold, physical gold and gold shares and so forth, but this is the minority. And then there are the gold detractors. These are mostly fund managers and so-called central bankers. And central bankers are not particularly smart. And then there are people who simply haven’t heard about gold as an investment… and don’t forget that in the U.S. 50 percent of the people have no interest in investments for the simple reason that they have no money. You could show them any proposal for an investment, they wouldn’t be interested because they have not the money to invest in the first place.

But in general I think that people will gradually wake up to the fact that in absence of knowing how the world will look like in five or ten years, you need some diversification and in this environment, I think that some people will say “well, let’s own some gold.” Most people will only own five or ten percent but some people will own 20 percent and I think that if the whole world decides to own, just say three percent or five percent, and the fund managers who are very anti gold see gold prices running up again… the whole investment business has become a momentum game… so if they see that gold is moving up in a convincing way they’ll buy gold.

So, my sense is that you need some gold strength and then people will come in and buy gold simply because it moves up. I buy gold all the time, of course within my asset allocation… I also have shares and bonds and real estate… but I always buy some gold to maintain the proper weighting.

Mike Gleason: Well, as we begin to close here, what do you expect for the remainder of 2017 and what kind of second half of the year do you think it will be for hard assets like gold and silver specifically?

Marc Faber: Well, at the beginning of the year so many people have started to write reports about the surprise of 2017 and projections of 2017, so everybody has a view, nobody knows precisely and the lot will depend on central banks’ monetary policies. I don’t believe central banks can tighten meaningfully, maybe optically they do some, but in general I think they’ll keep money printing on the table as far as we can see, in other words, for the next few years. And eventually it will be friendly for precious metals and hard assets. Number two, hard assets such as precious metals are at the historical low point compared to financial assets, so I think that going forward there’s a huge discrepancy in the performance between financial assets which has been very good since 2009 and gold which has been more mixed… it’s also up but it’s been more mixed especially after 2011… that these hard assets will come back into favor.

So, if you’re asking what is my expectation for the rest of 2017, I think that gold shares are an attractive asset class. I think precious metals can easily move up another 20, 30 percent, possibly 100 percent or so. In general, I would say American investors should take the opportunity that the dollar is strong and that asset prices, in other words stocks and bonds in the U.S. has been strong to reduce their positions in the U.S. in terms of equities.

Mike Gleason: Yeah and certainly you hit the nail on the head earlier there with the whole momentum trade and it will be interesting to see what happens if we do start to see some positive upside momentum in the metals… more and more hedge fund managers getting into that space and it really feeding on itself and creating a snowball effect there, it could be interesting to see that play out. Well, Dr. Faber thanks very much for your time and your wonderful insights and we certainly appreciate you staying up late in Thailand to speak with us today. Now before we let you go, tell people how they can subscribe The Gloom, Boom and Doom Report and get your fantastic commentaries on a regular basis.

Marc Faber: It’s my pleasure, the best is to go on the website www.GloomBoomDoom.com – it’s all written in one word.

Mike Gleason: Well, excellent stuff. It’s been a real honor to speak with you Dr. Faber. I hope we can catch up with you again sometime soon, thanks very much for joining us.

Marc Faber: My pleasure, thank you. Have a nice day.

Mike Gleason: Well, that will do it for this week. Thanks again to Dr. Marc Faber, editor and publisher of The Gloom, Boom and Doom Report, again the website is GloomBoomDoom.com be sure to check that out.

Zurich Conference Positive on Gold

 By Frank Holmes – CEO and Chief Investment Officer US Global Investors

There a lot construction Zurich now

Last week I returned from Zurich, where I spoke at the European Gold Forum. Investor sentiment for the yellow metal was particularly strong on negative real interest rates and heightened geopolitical uncertainty in the U.S., Europe, Middle East and South Africa. A poll taken during the conference showed that 85 percent of attendees were bullish on gold, with a forecast of $1,495 an ounce by the end of the year.

The upcoming presidential election in France is certainly raising concerns among many international investors. On one end of the political spectrum is Marine Le Pen, the far-right National Front candidate who, if elected, might very well pursue a “Frexit.” On the other end is Jean-Luc Mélenchon, a socialist of such extreme views that he makes Bernie Sanders look like Ronald Reagan. I was shocked to read that Mélenchon has pledged to implement a top tax rate of 100 percent—and even more shocked to learn that he’s moving up in the polls. An insane 100 percent tax rate would surely return the country to medieval-era feudalism, which is just another name for slavery. All the wealth naturally goes to the very top, and corruption thrives.

South African President Jacob Zuma

It’s important to recognize that in civil law countries such as France, hard line socialism is much more likely to take hold. Just look at South Africa. While in Zurich, I had the pleasure to speak with Tim Wood, executive director of the Denver Gold Group and former associate of South Africa’s Chamber of Mines.  According to Tim, the poor government policies of South Africa’s socialist president, Jacob Zuma, is driving business out of the country and has led to the resignations of several members of parliament. Tens of thousands of protestors have taken to the streets of Johannesburg demanding Zuma to step down, especially following his firing of Finance Minister Pravin Gordhan. The rand, meanwhile, has plummeted and the country was recently downgraded to “junk” status

One of the consequences of a weaker rand has been stronger gold priced in the local currency and higher South African gold mining stocks, as measured by the FTSE/JSE Africa Gold Mining Index. Among the gold companies that have seen some huge daily moves in recent days are Sibanye Gold and Harmony Gold.

South African Gold Stocks Rand Weakness
click to enlarge

South African gold stocks look very attractive in the short term. Over the long term, however, producers might find it increasingly difficult to operate efficiently and profitably in such a mismanaged jurisdiction.

PMIs Show Impressive Manufacturing Growth

It was an eventful week, to say the least. The U.S., for the first time, became directly involved militarily in Syria’s years-long civil war. Senate Republicans invoked the “nuclear option” to prevent a Democratic filibuster, allowing federal judge Neil Gorsuch to obtain Supreme Court confirmation. President Donald Trump met with Chinese leader Xi Jinping at Mar-a-Lago, the so-called “Winter White House,” to discuss trade and North Korea, among other issues.

And on Friday we learned the U.S. added only 98,000 jobs in March, down spectacularly from the 235,000 that came online in February. In response to this and the Syrian air strike, gold jumped more than 1 percent, touching $1,272 in intraday trading, its highest level in five months.

Fresh purchasing manager’s index (PMI) readings for the month of March were also released, showing continued manufacturing sector expansion in the world’s largest economies, including the U.S., China and the eurozone. All of Zurich was under construction, it seemed, with cranes filling the skyline in every direction. And when I flew back into San Antonio, sections of the international airport were also under heavy construction. This all reflects strong local and national economic growth in Switzerland and the U.S.

The official China PMI rose to 51.8, the fastest pace in nearly five years. Because the PMI is a forward-looking tool, this bodes well for industrial metals, as measured by the London Metal Exchange Index (LMEX). The Asian giant, as I’ve pointed out before, consistently ranks among the top importers of copper, aluminum, steel and more.

Industrial Metals Tracked China Manufacturing PMI
click to enlarge

The U.S. Manufacturing ISM cooled slightly to 57.2, down from 57.7 in February. This still remains high on a historical basis. Because the U.S. is the number three producer of crude, following Russia and Saudi Arabia, oil prices have tended to track the country’s manufacturing index.

Crude Oil Has Mostly Tracked US Manufacturing ISM
click to enlarge

Trump Tackles U.S. Trade with China

Again, Trump met with China’s Xi, a man who can be considered the U.S. president’s counterpart in many more ways than one. In February, I included Xi in a list of four global leaders who have more in common with Trump than some people might realize. Last week the Brookings Institute compiled a list of the many “striking similarities” between the two men. Among other commonalities, they’re both nationalists; they’re both populists and have expressed a desire to fight corruption; they both have a rocky relationship with the press and intellectual community; and they both prioritize domestic affairs over foreign affairs.

None of this stopped Trump from being very critical of China on the campaign trail. He threatened to name the country as a currency manipulator and raise tariffs as much as 35 percent. It will be interesting to see what agreements, if any, can come out of this meeting between the two leaders.

Trump is not wrong to raise the alarm over U.S.-China trade. In 2016, the U.S. trade deficit with China stood at a whopping $347 billion. This is down slightly from $367 billion in 2015, but still a huge number. If you look at the total U.S. balance of payments since 1960, you get an even greater sense of the imbalance.

Can Trump Balance US Trade
click to enlarge

At the same time, world trade volume growth has improved in recent months, especially in emerging markets and Asia.

World Trade Volume Growth Headed Right Direction
click to enlarge

It’s important that Trump puts ample thought into improvements in international trade. I’m not convinced tariffs and border adjustment taxes (BATs) are the solution. Look at what happened in the 1930s with the Smoot-Hawley Tariff Act. In an effort to “protect American jobs,” the U.S. raised tariffs on more than 20,000 goods coming into the country, many of them as high as 59 percent. Once the act went into effect in June 1930, a trade war promptly ensued and global trade all but dried up. Today, historians almost unanimously agree that the policy, which President Franklin Roosevelt later overturned, only exacerbated the effects of the Great Depression.

One of the biggest reasons why the U.S. has such a trade deficit is due to its abnormally high corporate tax rate. The country’s largest export is intellectual and human capital. Think Apple and Google, which are designs and ideas. The problem is that the dollars received in exchange for these goods and services are sitting in Ireland, or elsewhere, and are thus not counted in the official trade balance. Should the corporate tax rate decline to an average of around 18 to 20 percent, which is consistent with other developed countries, U.S. multinational companies would likely be more inclined to repatriate those profits and tilt the balance back in America’s favor.

Tax reform, therefore, is key in making sure the U.S. remains competitive on the world stage.

Gold jumps on US missile strike

Gold Today –New York closed at $1,251.70 yesterday after closing at $1,256.10 Tuesday. London opened at $1,264.00 today. 

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

         The $: € was stronger at $1.0638 after yesterday’s $1.0664: €1.

         The Dollar index was stronger at 100.71 after yesterday’s 100.60

         The Yen was stronger at 110.65 after yesterday’s 110.77:$1. 

         The Yuan was slightly stronger at 6.8992 after yesterday’s 6.8995: $1. 

         The Pound Sterling was slightly weaker at $1.2465 after yesterday’s $1.2475: £1.

Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    4      7

     2017    4      6

     2017    4      5    

SHAU

SHAU

SHAU

/

280.38

280.13

/

280.42

280.13

$ equivalent 1oz @    $1: 6.8992

       $1: 6.8995

       $1: 6.8892

      

  /

$1,263.97

$1,264.24

/

$1,264.15

$1,264.28

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.]

 Gold was trading on the Shanghai Gold Exchange at RMB282.24 towards the close.

This translates into $1,267.41. New York is trading at a $15.71 discount to Shanghai and London opened at a $3.41 discount to Shanghai. The close in New York was before the missile strikes in Syria.

LBMA price setting:  The LBMA gold price was set today at $1,264.30 from yesterday’s $1,253.75.  

The gold price in the euro was set at €1,189.37 after yesterday’s €1,174.58.

Ahead of the opening of New York the gold price was trading at $1,262.70 and in the euro at €1,188.09. At the same time, the silver price was trading at $18.35. 

Silver Today –Silver closed at $18.23 yesterday after $18.30 at New York’s close Wednesday.

Price Drivers

Overnight, the U.S. struck Syria with cruise missiles on President Trump’s order. The global political situation has degenerated, at least for now, causing gold to jump through the 200-day average. Will this hold? At first glance, we would think not, as it is not a cause for war between Russia and the U.S. simply a punitive strike, in response to the use of chemical weapons in what is more than a civil war in Syria. It is, to us, a long term middle east wide religious war between Shia [Assad/Iran, etc] and Sunni [rebels/Saudis, etc] sides of Islam set to continue for the foreseeable future.

The initial market reaction is to see it as the beginning of another longer term U.S. operation in the Middle East, but we expect markets to calm down as they see it as a one-off strike. Gold and silver are likely to retreat as matters calm down, but how far?

However, if gold does hold at current levels today, over $1,260, then the 200-day average will prove to be support and prices likely to rise.

With the Jobs report out today in the U.S. we may see efforts to pull gold and silver prices back. The news that the U.S. economy is strong is discounted in the market, perhaps too much so. As the Fed warned of overvaluations in equity markets it is possible the Jobs report has no effect on gold and silver prices.

Thus today could be a volatile day for precious metals as there is a lot of emotional content right now.

Gold ETFs – Yesterday saw no purchases or sales into or from the SPDR gold ETF but purchases of 0.45 into the Gold Trust.  Their respective holdings are now at 836.765 tonnes and 200.26 tonnes. 

Julian D.W. Phillips 

 GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

Gold needs to break through 200 day MA to make move higher

 Gold Today –New York closed at $1,256.10 yesterday after closing at $1,256.30 Tuesday. London opened at $1,253.65 today. 

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

         The $: € was stronger at $1.0664 after yesterday’s $1.0670: €1.

         The Dollar index was slightly stronger at 100.60 after yesterday’s 100.57

         The Yen was slightly weaker at 110.77 after yesterday’s 110.70:$1. 

         The Yuan was weaker at 6.8995 after yesterday’s 6.8892: $1. 

         The Pound Sterling was stronger at $1.2475 after yesterday’s $1.2428: £1.

Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    4      6

     2017    4      5

     2017    4      4    

SHAU

SHAU

SHAU

/

280.13

/

/

280.03

/

$ equivalent 1oz @    $1: 6.8995

       $1: 6.8892

       $1: 6.8836

      

  /

$1,264.24

/

/

$1,264.28

/

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 reopened today and was trading at 280.6 towards the close.

This translates into $1,264.97. New York is trading at a $3.87 discount to Shanghai and London opened at a $6.32 discount to Shanghai.

LBMA price setting:  The LBMA gold price was set today at $1,253.75 from yesterday’s $1,252.50.  

The gold price in the euro was set at €1,174.58 after yesterday’s €1,173.96.

Ahead of the opening of New York the gold price was trading at $1,252.45 and in the euro at €1,173.81. At the same time, the silver price was trading at $18.23. 

Silver Today –Silver closed at $18.30 yesterday after $18.31 at New York’s close Tuesday.

Price Drivers

In the last day, the gold price broke down to $1,244 before recovering back above $1,250. So the support still holds at $1,250, but it has to break through the 200-day moving average of around $1,260 before rushing higher. So we should be ready for a gold price move either way today.

The Fed Minutes stated that, by traditional valuations, the equity markets in the U.S. are too high. So we watch the S&P 500 to see what impact that will have.  They also indicated that they may reduce the Fed’s Balance Sheet later in the year. While two interest rate hikes in the future are already priced in the monetary tightening is not. It may well result in the yield curve rising across its spectrum.

In Europe, Mario Draghi cautiously implied that the fear of inflation has passed and while risks remain to the downside he was more confident that growth across the E.U. economy is becoming positive. To us there are so many continuing risks in Europe that one needs to continue to question the future of the E.U. economy. What we did find somewhat disturbing in what he said, was that the more positive shape of the economy was due to two factors, monetary policy and the oil price fall. Oil market commentators are pointing to rising oil prices [but not back to triple digit levels] If oil prices do rise significantly, [which does seem unlikely as it will unleash more supplies] the fragile E.U. economies will suffer alongside economic recoveries across the globe.

Top of today’s events is the meeting between President’s Xi of China and President Trump. If President Trump’s election promises are to be a guide the meeting should end with potential confrontations and massive tariffs on Chinese imports into the U.S.   A sobering fact on this issue is that 73% of shoes sold in the U.S. are made in China [as an example of what could happen]. Or will we see a dampening of election ardor?

With the Obamacare repeal failing, what will happen to potential tax cuts? If Trump fails to get these through, we are back to the last 8 years of gridlock in government. Unless Trump has a major victory we cannot expect to see the vibrant growth Trump promised. As it is the dollar is expected to decline gently from now on. If his failure on Obamacare is reinforced with more failure, the dollar’s fall will accelerate against gold.

Gold ETFs – Yesterday saw no purchases or sales into or from the SPDR gold ETF but sales of 0.04 from the Gold Trust.  Their respective holdings are now at 836.765 tonnes and 199.81 tonnes. 

Julian D.W. Phillips 

 GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

Negative real interest rates give gold strong support

By Frank Holmes – CEO and Chief Investment Officer US Global Investors

7 Reasons to Be Bullish on Emerging Europe

In case you haven’t already noticed, inflation has been steadily creeping up since July. In February, the most recent month of available data, consumer prices advanced at their fastest pace in five years, hitting 2.7 percent year-over-year. March data won’t be released until next week, but I expect prices to proceed on this upward trend, buttressed by rising mortgages and costs associated with health care and energy.

One of the consequences of strong inflation is that real rates—what you get when you subtract the current consumer price index (CPI) from the nominal rate—have turned negative. And when this happens, gold has typically been a beneficiary. This is the Fear Trade in action.

Take a look below. Gold shares an inverse relationship with the real 10-year Treasury yield, which is influenced by consumer prices. When inflation is soft and the yield goes up, gold contracts. But when inflation is strong, as it is now, it can push the Treasury yield into subzero territory, prompting many investors to move into other so-called safe haven assets, including gold.

Gold Expected to Continue Benefiting from Low to Negative REal Rates
click to enlarge

Again, I expect consumer prices to continue rising, especially if President Donald Trump gets his way regarding immigration and trade. Slowing the stream of cheap labor from Mexico and other Latin American countries, coupled with raising new tariffs at the border, should have the effect of making consumer goods and services more expensive. Although it might sting your pocketbook, faster inflation could be constructive for gold investors.

$1,475 an Ounce Gold this Year?

In its weekly precious metals report, London-based consultancy firm Metals Focus emphasized the importance of negative real rates on the price of gold, writing that “real and even nominal rates across several other key currencies, including the euro, should also remain negative for some time.” The European Central Bank’s deposit rate currently stands at negative 0.4 percent, not including inflation, and Sweden’s Riksbank, the world’s oldest central bank, will continue its negative interest rate policy as it awaits stronger economic growth. Meanwhile, the Bank of Japan left its short-term interest rate unchanged at negative 0.1 percent at its meeting last month.

This is all beneficial for gold. Discouraged by the idea of negative rates eating into their wealth, many savers might be compelled to invest in gold, which enjoys a reputation as an excellent store of capital.

Based on the near-term outlook for real rates, as well as uncertainty over Brexit, rising populism in Europe and Trump’s trade and foreign policies, Metals Focus analysts see gold testing $1,475 an ounce this year. If so, that would put the yellow metal at a four-year high.

Central Banks Still Have an Appetite for Gold

Since 2010, global central banks have been net buyers of gold as they move to diversify their reserves away from the U.S. dollar. Although 2016 purchases fell about 35 percent compared to 2015, they still remained high on a historical basis, thanks mostly to China and Russia.

These purchases are likely to continue this year, according to Metals Focus, though at a slower rate as many banks get closer to meeting their target reserves amount.

Central Banks Have Been Net Buyers of Gold Since 2010
click to enlarge

Because gold accounts for only 2.3 percent of China’s reserves, as of March, the Asian country might very well keep up with its monthly purchases for some time. (The U.S., by comparison, has nearly 75 percent of its reserves in gold.)

I’ve pointed out before that it’s reasonable for investors to pay attention to what central banks are doing. They’re diversifying their assets and, in a way, hedging against their very own policies. It would be prudent for every household to do the same. As such, I recommend a 10 percent weighting in gold, with 5 percent in bullion (coins and jewelry), the other 5 percent in quality gold stocks.

Gold knocked back by positive private sector jobs data

 Gold Today –New York closed at $1,256.30 yesterday after closing at $1,253.20 Monday. London opened at $1,255.00 today. 

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

         The $: € was weaker at $1.0670 after yesterday’s $1.0657: €1.

         The Dollar index was weaker at 100.57 after yesterday’s 100.61

         The Yen was weaker at 110.70 after yesterday’s 110.47:$1. 

         The Yuan was weaker at 6.8892 after yesterday’s 6.8836: $1. 

         The Pound Sterling was weaker at $1.2428 after yesterday’s $1.2437: £1.

The Shanghai Gold Exchange has been closed since the weekend due to a Chinese public holiday, but reopened today and was trading between 280 and 280.5 towards the close.

This translates into $1,264 and $1,266.41. New York is trading at a $5.11 discount to Shanghai and London opened at a $6.41 discount to Shanghai.

LBMA price setting:  The LBMA gold price was set today at $1,252.50 from yesterday’s $1,258.65.  

The gold price in the euro was set at €1,173.96 after yesterday’s €1,183.16.

Ahead of the opening of New York the gold price was trading at $1,252.70 and in the euro at €1,173.05. At the same time, the silver price was trading at $18.27. 

Silver Today –Silver closed at $18.31 yesterday after $18.22 at New York’s close Monday.

Price Drivers

While the gold price retreated today in both the dollar and euro it had remained above $1,250, but some positive US private sector  jobs data knocked it back below this level. It had appeared to be building a base, still, waiting for news that would make it move but when the news came out it was gold negative – at least initially.

The gold price is like a mirror for the different currencies and their financial systems.

It is an inefficient market in that it does not reflect such on a day to day basis. It reflects the situation over time and has to contend with all sorts of interference from speculators banks and governments. But, over time, it is an unbiased, accurate reflection of a nation’s financial condition through its exchange rate against gold.

That’s why we found the letter to shareholders from Jamie Dimon, CEO of JP Morgan is an important one for gold prices in the U.S. $.

While saying the U.S. is an exceptional country, he added, “it is clear that something is wrong.” He included in his letter, “…. It is understandable why so many are angry at the leaders of America’s institutions, including businesses, schools and governments. …This can understandably lead to disenchantment with trade, globalization and even our free enterprise system, which for so many people seems not to have worked. We need trust and confidence in our institutions.”  

The questions to be asked by gold are, “Are the U.S. institutions prepared to adjust their own priorities to rectify the situation? Internationally, just how will the U.S. “become great again”?

Within the U.S. in a globalized world, with a massive Chinese economy rising, will the U.S. have sufficient influence to continue to dominate the global economy, in a multi-currency system, or is it inevitable that its role as the global reserve currency will wane?

Over time, gold will reflect the actions taken to rectify the situation, not the good intentions!

In each country, its currency’s value against the gold price will reflect its financial condition against gold. In the last week, for instance, South Africans that own gold have seen the Rand price of gold rise in double digit percentages, while the Rand sank, demonstrating our point well.

Gold ETFs – Yesterday saw no purchases or sales into or from the SPDR gold ETF or the Gold Trust.  Their respective holdings are now at 836.765 tonnes and 199.85 tonnes. 

Julian D.W. Phillips 

 GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance