Gold continuing downwards drift

Gold Today –New York closed at $1,215.80 on the 7th March after closing at $1,226.00 on the 6th March. London opened at $1,212.60 today. 

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

-         The $: € was stronger at $1.0558: €1 from $1.0598: €1 yesterday.

-         The Dollar index was stronger at 101.90 from 101.57 yesterday. 

-         The Yen was weaker at 113.95:$1 from yesterday’s 113.90 against the dollar. 

-         The Yuan was weaker at 6.9049: $1, from 6.8981: $1, yesterday. 

-         The Pound Sterling was weaker at $1.2172: £1 from yesterday’s $1.2232: £1.

Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    3    8

     2017    3    7

      2017    2    6










$ equivalent 1oz @  $1: 6.9049

      $1: 6.8981

$1: 6.8783







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.]

At the close in Shanghai today, the gold price was trading at 274.02 Yuan once again, which directly translates into $1,234.34. But allowing for the difference of gold being traded this equates to a price of $1,229.34. This is $13.54 higher than the New York close and $16.74 higher than London.

We are reminded that gold cannot be exported from China, but it can be imported. This ensures that the ebbs and flows of gold prices always lead to gold entering China in a greater or lesser amount. With such price differentials being seen now arbitrageurs are buying London and selling Shanghai.

As we have seen over the past year when gold prices fall there is a shift of actual gold bullion to China. It is a constant feature that is making China the global, physical, gold hub. We have seen Shanghai dominate gold prices, recently and expect it to continue doing so in the future. But what, as we see now, happens when Shanghai prices fall? Is it easy to see who is leading whom. When an item like a Fed rate hike is on the cards, Shanghai listens and takes gold prices down after seeing them fall in New York so it is difficult to tell, but we feel it was the item that led the way, not New York’s lower gold price.

LBMA price setting:  The LBMA gold price was set today at $1,213.30 down from yesterday’s $1,223.70.  

The gold price in the euro was set higher at €1,149.50 after yesterday’s €1,157.60.

Ahead of the opening of New York the gold price was trading at $1,213.35 and in the euro at €1,156.84.  At the same time, the silver price was trading at $17.41. 

Silver Today –Silver closed at $17.48 at New York’s close yesterday against $17.77 on the 6th March.

Price Drivers

The gold price remains on support at current levels. The rate hike coming next week has/is being discounted by global markets. Shanghai prices are falling back but not nearly as much as in New York or London. These are not moves prompted by exchange rate moves. In both London and New York there are no buyers, so prices are drifting. It will take relatively small volumes to move prices either way.

Such lower prices, we believe, will prompt Asian demand but will not be seen in force until a bottom is formed. At that point Asian demand should lead the way. We expect Indian demand to become robust up until May.  While the equity markets look toppy now a rate hike may well hurt them.

Gold ETFs – Yesterday saw no sales or purchases into or from the SPDR gold ETF or the Gold Trust.  Their respective holdings are now at 836.766 tonnes and 197.52 tonnes. 

 Julian D.W. Phillips | | StockBridge Management Alliance 


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