Gold pulled back by stronger dollar and big sale out of GLD

 Gold Today –New York closed at $1,251.80 yesterday after closing at $1,260.30 Monday. London opened at $1,250.30 today. 

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

-         The $: € was stronger at $1.1189 after yesterday’s $1.1252: €1.

-         The Dollar index was stronger at 97.33 after yesterday’s 96.90

-         The Yen was weaker at 111.88 after yesterday’s 111.24:$1. 

-         The Yuan was barely changed at 6.8905 after yesterday’s 6.8901: $1. 

-         The Pound Sterling was barely changed at $1.2978 after yesterday’s $1.2980: £1.

Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    5    24

     2017    5    23

     2017    5    22








Trading at 281.30



$ equivalent 1oz at 0.995 fineness

@    $1: 6.8906

       $1: 6.8901

       $1: 6.8903     





Trading at $1,264.77



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.]

 New York closed $13.55 lower than Shanghai yesterday. London opened today at a $14.47 discount to Shanghai.

London today and New York yesterday, took gold lower with Shanghai remaining steady at yesterday’s prices. If pricing power lies in Shanghai, gold price will climb this week in London and New York. This is a test of where that power lies [very short-term].

Silver Today –Silver closed at $17.07 yesterday after $17.14 at New York’s close yesterday.

LBMA price setting:  The LBMA morning gold price was set today at $1,251.35 from yesterday’s $1,259.90.  The gold price in the euro was set at €1,118.77 after yesterday’s €1,119.61.

Ahead of the opening of New York the gold price was trading at $1,252.80 and in the euro at €1,111.82. At the same time, the silver price was trading at $17.07 

Price Drivers

Again it was a day for the gold price to change because of the dollar’s influence as it strengthened a little, but remained at low levels. There was a significant sale of gold from the SPDR gold ETF (GLD) which assisted the fall. The discounts of London and New York to China widened quite heavily yesterday, but only to the extent that held the euro price of gold relatively steady. As we said yesterday, “For a convincing breakout in the gold price we need to see it rise strongly in the euro too. With the Chinese Yuan doing its best to stay close to the moves in the dollar, we expect Shanghai to remain stable.” Overall it is a day for gold to mark time waiting for an event to move it strongly either way.

The Fed

It is quite clear that the markets now expect a June rate hike from the Fed and, by the end of the year, a third hike. We don’t see these moves as promoting a fall in the gold price, except maybe for a short time. We do see inflation rates remaining negative, further encouraging gold price rises.

Gold’s seasonality in India

We are entering the quiet time of the year for Indian demand as they plant crops ready for the monsoon. This quiet period should last until the beginning of September, after crops are harvested. A good Monsoon is forecast, so we expect demand to be strong in the fourth quarter of the year.

In the past few years as the path of urbanization remains strong there, gold demand’s seasonality has diminished. The resulting enrichment of urban Indians has helped enhance overall gold demand. With last year’s ‘de-monetization’ of the two highest denomination banknotes in the country causing havoc and postponing gold demand, we expect a better year for Indian demand this year than last. Of course, with the threat of 3% [?] General Sales Tax being added to ‘legitimate’ purchases of gold and to the reporting of them to the authorities, the quest for ‘unofficial’ gold purchases [from smugglers] grows. We are certain that Indian gold buyers will buy, whether they do it legally or illegally. We therefore estimate that Indian demand will reach 1,000 tonnes + this year, but a significant portion of this will not be reported.

Gold ETFs – Yesterday, saw sales of 5.031 of a tonne from the SPDR gold ETF but no change in the holdings of the Gold Trust. Their holdings are now at 847.452 tonnes and at 202.82 tonnes respectively. This relatively heavy sale of gold was sufficient to lower gold prices on the back of a weaker dollar.

Since January 6th 2017 38.678 tonnes have been added to the SPDR gold ETF and the Gold Trust.

 Julian D.W. Phillips | | StockBridge Management Alliance 


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