Record Q1 gold demand as ETF purchases continue


Gold TodayGold closed in New York at $1,277.70 up from Tuesday’s $1,266.40. On Thursday morning in Asia it fell to $1,272.65, as the Yuan continued to weaken against a dollar that held at yesterday’s levels, before the LBMA price setting in London.

LBMA price setting:  $1,268.30 down from Wednesday’s $1,271.80.

Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
2016  05  11

2016  04  11







Dollar equivalent @ $1: 6.5414

$1: 6.5377





The Gold Fixing in Shanghai’s morning was just under $8 lower than New York’s close. London’s opening was higher than Shanghai’s afternoon Fix initially telling us that physical demand in China caused the price to stay at levels of the day before. We need a few days of price disparity to see who’s leading whom.

We are also watchful to see if London stays higher than Shanghai as we do in time expect both higher London prices and much more price volatility as liquidity decreases.

Today, again, sees currency exchange rates more or less the same as yesterday leaving gold to show itself almost independently of currencies. We do need more volatility in the gold price to see this clearly, but the Technical picture is showing a narrowing trading range, as it moves to balance above support.

At this point in time the gold price could go either way in a strong move according to the Technical picture, in the very short term.   

The main news today that may affect the gold price is the Bank of England’s meeting at which they will disclose their view on interest rates. In the U.K. the economic data has been poor, so we do not expect a rate hike. The speech that Mr. Carney gives will impact exchange rates and the gold and silver price, today.

The dollar index is almost unchanged at 93.96 down from Wednesday’s 93.98. The dollar is also almost unchanged against the euro at $1.1409 from yesterday’s $1.1411.

The gold price in the euro was set at €1,111.67 down from Wednesday’s €1,120.47.

Ahead of New York’s opening, the gold price was trading at $1,267.35 and in the euro at €1,112.59, but then rallied on some more disappointing U.S. jobs data.

Silver Today –The silver price closed in New York on Wednesday at $17.39 higher than Wednesday’s $17.10. Ahead of New York’s opening the silver price stood at $17.24.

Price Drivers

In the first quarter of 2016 demand for gold grew 21% to 1,289.8 tonnes, the strongest first quarter on record. U.S. views on the gold price have changed dramatically.

Investment demand out of the U.S. was the main driver as we have highlighted in our newsletters. ETF demand was 364 tonnes came into these funds, which more than reversed the cumulative outflows from 2014 and 2015.

The impact on gold prices gave the gold price its best performance in almost 30 years!

Jewelry demand fell sharply on higher prices and market-specific factors.

Central bank buying slowed. As we commented earlier in the week and in our newsletters, such demand absorbs the ‘slack’ in the market and does not chase prices. Hence they would have held back. Chinese central bank demand would, in particular be affected. Russia and Kazakhstan take local production into their reserves so these do not reach the global market.

Indian consumers hamstrung. Indian demand appeared to be being stifled because of the jeweler’s strike against the imposition of the 1% Excise duty. As we have commented before in our newsletters we are not happy with ‘official’ import figures and ‘official’ demand numbers, because of the well-established, profitable and prevalent smuggling of gold into the country. During the strike we had reports that told us jewelers continued to work, out of sight. Clearly this was with gold bought from smugglers. But such quantities are unquantifiable. With an 11% profit on smuggled gold the volumes by now must be significant.

Gold ETFs – Yesterday saw purchases of 2.674 tonnes of gold bought into the SPDR gold ETF but nothing into the Gold Trust. This leaves their holdings at 841.92 and 197.78 tonnes in the SPDR & Gold Trust, respectively.  

Silver – The Silver price continues stable and keen to move. It is chomping at the bit still.

Julian D.W. Phillips | | StockBridge Management Alliance


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