Gold and silver drifting lower. Opportunity knocks?

Gold TodayNew York closed yesterday at $1,314.00 yesterday.  London opened at $1,322.60.

    • The $: € was barely changed at $1.1240: €1 from $1.1239: €1 yesterday.
    • The Dollar index was weaker at 95.30 from 95.43 yesterday.
    • The Yen was stronger at 102.00: $1 up from 102.25: $1 yesterday against the dollar.
    • The Yuan was slightly stronger at 6.6740: $1 from 6.6790: $1 yesterday.


  • The Pound Sterling was unchanged at $1.3229: £1 from yesterday’s $1.3229: £1.


Yuan Gold Fix

With Shanghai on holiday London and New York continued to make the prices of gold and silver without input from Shanghai

LBMA price setting:  The LBMA gold price setting on Thursday was at $1,314.25. Yesterday it was at set at $1,320.10.

The gold price in the euro was set at €1,171.03 against yesterday’s €1,174.36.

Ahead of the opening of New York the gold price was trading at $1,313.35 and in the euro at €1,170.44.  At the same time, the silver price was trading at $18.93.

Silver Today –The silver price was lifted to $19.00 at New York’s close yesterday up from $18.98, Wednesday.  

Price Drivers

The gold price is drifting assisted by a steady stream of selling from the SPDR gold ETF in the last week. These sales do seem to be aiming at lowering prices. It is a great opportunity for bears insofar as a short position taken on COMEX of a larger size than the physical sales ensures profits on the falls. This is what’s happening now. But the drifting nature of the gold price could be turned back just as fast by a large buy order.

The lower the gold price drifts the closer to heavy support at around $1,300.

Indian Demand – The start of the gold season is underway. The discount prices on gold are disappearing and gold should be trading at the same price as London from next week onwards.

The monsoons were very good this year letting farmers make a decent profit for the first time in three years.

Governmental sources say that is because smuggling is now being deterred by better policing of smuggler’s routes at airports. We doubt that they are having such an impact as smugglers routes into the country are many and varied along India’s vast borders along mountainous passes and along the coast as well as at airports. Large volumes would not go through airports. What is clear is that smuggled gold comes in at an 11% discount to official imports where duty is paid.

We see the disappearance of discounts as an indicator of demand absorbing both ‘official’ imports and smuggled imports.

While China is on holiday for the long weekend they return next week to an economy that is stabilizing, where the middle classes are burgeoning and buying cars in record numbers. This enrichment of the poor could eventually extend to more than a third of the population, all of whom are attracted by gold as an investment.

While their disposable income levels dictate the amounts of gold they can buy [a 25% rise in price reduces the amount of gold buyable by 25%] the sheer rise in numbers of richer people overwhelms the increased cost of buying gold in terms of buying potential.

Gold ETFs – There were sales of 3.264 tonnes of gold from the SPDR gold ETF but no change in the Gold Trust yesterday, leaving their respective holdings at 932.225 tonnes and 225.84 tonnes.

Silver – With silver prices falling far less, in percentage terms, than gold we see silver investors unwilling to believe the fall in the gold price will go much lower or for longer.

Julian D.W. Phillips | | StockBridge Management Alliance


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