Gold looking for a bottom - nearing $1200

 Gold Today –New York closed at $1,208.70 on the 8th March after closing at $1,215.80 on the 7th March. London opened at $1,205.00 today.

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

-         The $: € was stronger at $1.0535: €1 from $1.0558: €1 yesterday.

-         The Dollar index was stronger at 102.17 from 101.90 yesterday. 

-         The Yen was weaker at 114.50:$1 from yesterday’s 113.95 against the dollar. 

-         The Yuan was weaker at 6.9113: $1, from 6.9049: $1, yesterday. 

-         The Pound Sterling was slightly weaker at $1.2164: £1 from yesterday’s $1.2172: £1.

Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    3    9

     2017    3    8

      2017    2    7










$ equivalent 1oz @  $1: 6.9113

      $1: 6.9049

$1: 6.8981







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 272.01 Yuan once again, which directly translates into $1,224.15. But allowing for the difference of gold being traded this equates to a price of $1,219.15. This is $10.45 higher than the New York close and $14.15 higher than London.

Shanghai continues to see lower prices reflecting falling demand inside China. We cannot attribute these to the expected U.S. Fed’s rate hike too much as China walks its own road. The price falls are accelerating as we see the difference between New York and Shanghai narrow however, we do not expect this to last for too long as the Yuan has begun to reflect the rise in the dollar by falling to over 6.9. Inflation in China is reported as falling but the PPI index [Production Prices] have jumped, pointing to rising inflation.

LBMA price setting:  The LBMA gold price was set today at $1,204.60 down from yesterday’s $1,213.30.  

The gold price in the euro was set lower at €1,140.61 after yesterday’s €1,149.50.

Ahead of the opening of New York the gold price was trading at $1,206.35 and in the euro at €1,142.81 At the same time, the silver price was trading at $17.19. 

Silver Today –Silver closed at $17.24 at New York’s close yesterday against $17.48 on the 7th March.

Price Drivers

The gold price is testing support at the moment. But today’s actions on top of those of the last few days reflect the strength of the dollar mainly. As we wrote the gold price has started to move up ahead of the opening of New York. This is usually a sign of finding the bottom. We expect such consolidation for the next few days.

With the first assessment of the jobs numbers now out at 298,000 private sector jobs in February the real number expected tomorrow may prove so robust that it implies another rate hike in June. It is likely that the dollar will move higher tomorrow putting more pressure on the gold price. What is of key interest is the question of whether the rate hike brings in ‘real’ interest rates or is inflation leading the way leaving negative interest rates in place.

Most potential U.S. gold buyers are standing on the sidelines at the moment waiting to see if further falls are expected. Please note there are few physical sellers except in Shanghai today, at higher prices. This implies that it will take only small volumes of buying or selling to move prices.

Indian Imports

Having said that we have received reports of a 175% jump in imports of gold to India to 96.4 metric tons from a year earlier, as jewelers increased stockpiles before the festival and wedding period that starts next month. The wedding season runs from April to July, so we are expecting some more recovery in demand.

Chinese imports

In China, Shanghai withdrawals for February jumped 66.6% to 170.24 tonnes from a year earlier, showing that far eastern demand is robust and rising. The low prices we see now must be inciting demand further ahead of the wedding season.

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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