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 | | StockBridge Management Alliance 


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