Gold strengthens: All three major markets in sync.

 Gold Today –New York closed at $1,258.70 Wednesday after closing at $1,236.50 Tuesday. London opened at $1,258.20 today. 

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

-         The $: € was weaker at $1.1131 after yesterday’s $1.1116: €1.

-         The Dollar index was weaker at 97.57 after yesterday’s 98.87

-         The Yen was stronger at 110.77 after yesterday’s 112.18:$1. 

-         The Yuan was stronger at 6.8902 after yesterday’s 6.8814: $1. 

-         The Pound Sterling was stronger at $1.3036 after yesterday’s $1.2964: £1.

Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    5    17

     2017    5    16

     2017    5    12










$ equivalent 1oz @    $1: 6.8814

       $1: 6.8919

       $1: 6.9047     







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.]

 The Shanghai Gold Exchange was trading at 280.00 towards the close today. This translates into $1,258.97. New York closed at a $0.27 discount to Shanghai’s close Friday. London opened at a discount of $0.77 Shanghai’s close today.

On the evidence above, New York hit gold’s peak price in the day, first, then Shanghai rose to meet it and London opened at the same level. In an extraordinary picture ALL THREE GLOBAL GOLD MARKETS ARE AT AROUND THE SAME PRICE. This is the first time we have ever seen this happen. While we used the dollar as the measuring currency, we note that the gold price is the same in all markets, so currencies, today are not the influence.

What does this mean? It means today there is one global gold price! The gold price is doing its job! Shanghai’s demand was, in fact, the main factor driving prices higher.

LBMA price setting:  The LBMA gold price was set today at $1,261.35 from Wednesday’s $1,244.60.  The gold price in the euro was set at €1,135.02 after Friday’s €1,119.65.

Ahead of the opening of New York the gold price was trading at $1,260.30 and in the euro at €1,132.70. At the same time, the silver price was trading at $16.73. 

Silver Today –Silver closed at $16.89 yesterday after $16.82 at New York’s close Tuesday.

 Price Drivers

The jump in the gold price in all currencies was consistent with the gold price confirming it has returned to the upside, after resisting downside pressure while sitting on support.

While the gold price has moved strongly over the last couple of days in all currencies, that is not the exciting news of the day. Yes, gold has resumed its rise and held above support at $1,230 and looks like moving up to resistance, once more.

Global gold markets in unison

To us the exciting feature of the day is that the three global gold markets have virtually no premiums or discounts on the gold price between themselves. It is also clear that the influence of Shanghai is underlyingly dominant and may well remain so.  We continue to watch the interaction between the three markets. We ask, are the Chinese and U.K. banks honing their arbitrage skills?

Long term, this story may well exert the most important influence since 2005 when central banks and gold miners were forced to retreat from their anti-gold positions established in the late 20th century. What is for sure is that Shanghai’s influence cannot be removed by London or New York, nor can they re-capture their former dominance of the gold market. The gold ‘paper’ market, if isolated from the physical gold market, cannot exert its influence over the gold price.

The Trump Factor

We look at the current political turmoil in the U.S. from a different perspective to the financial and mainstream media. Standing back, it is very clear that President Trump has angered the media, in particular, but of more importance the “establishment”, which he described as a ‘swamp’, which he was going to ‘drain’. He certainly underestimated the power of the establishment in defending themselves and attacking him. These issues are the fundamental ones that will dictate the political future of the U.S. going forward.

The Russia/Comey issues are the battlegrounds on which the war will be fought. What is the impact on gold? We see none, as there has been no buying or selling of gold into or from U.S. based gold ETFs in the last few days. The gold price is rarely impacted by political issues, unless they reach into currency issues internationally.

Politically the U.S. government is being given the appearance of being emasculated by this turmoil, delaying any implementation of the promises President Trump has made regarding tax, infrastructure or any other major issue. Can the government get any business done? The fall in the dollar of late may have been assisted by poorer economic prospects, alongside a growing E.U. but the suddenness of the fall in the last two days may have been triggered by the ferocity of the attacks on Trump.

Gold ETFs – Yesterday, once again, saw no change in the SPDR gold ETF or the Gold Trust. Their holdings are now at 851.891 tonnes and at 202.29 tonnes respectively.

 Julian D.W. Phillips | | StockBridge Management Alliance 


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