3.2 million oz of COMEX paper gold crashed the price on Tuesday

Gold TodayNew York closed at $1,268.60 yesterday after the previous close of $1,268.70.  London opened at $1,264.65.

    • The $: € was stronger at $1.1199: €1 from $1.1223: €1 yesterday.
    • The Dollar index was stronger at 96.23 from 96.06 yesterday.
    • The Yen was weaker at 103.62: $1 down from 103.11: $1 yesterday against the dollar.
    • The Yuan was weaker at 6.6895: $1 from 6.6820: $1 yesterday.
  • The Pound Sterling was slightly weaker at $1.2728: £1 from yesterday’s $1.2732: £1.

Yuan Gold Fix - the Shanghai Gold Exchange is closed for the Chinese Golden Week holiday

Shanghai remains on holiday. New York prices continue to dominate and will until the Chinese return on Monday.

LBMA price setting:  The LBMA gold price setting was at $1,265.50 against yesterday’s $1,274.00.

The gold price in the euro was set at €1,131.88 against yesterday’s €1,135.27.

Ahead of the opening of New York the gold price was trading at $1,260.25 and in the euro at €1,127.39.  At the same time, the silver price was trading again at $17.56.

Silver Today –The silver price fell to $17.50 at New York’s close yesterday from $17.85, Monday.  

Price Drivers

The evidence is out. 3.2 million ounces of gold futures, not gold, were traded in the first few minutes after New York opened the day before yesterday. This is what caused the fall triggering stop losses.

What all physical gold investors find hard to swallow is the gold prices were affected by no physical dealing. Virtually none of these contracts ever reach maturity but are closed before they do so, so no physical gold changes hands.

Nevertheless, the physical gold markets accepts these evaporating trades as really affecting the gold price, and they do!

Let’s be clear here, if you demanded physical delivery from such a contract, you would be refused and told to accept a cash settlement. Only if you give notice at the start of your contract that delivery must take place and this is matched to a similarly constructed contract, can delivery take place. Between 95% and 99% of contracts on COMEX never reach maturity or involve such physical contracts.

But with China closed and the ICBC/Standard bank a Chinese market maker in London standing on the sidelines and not jumping in on such price falls to buy, COMEX will continue to dominate. The Chinese market maker does have the financial power to take the reins of pricing power, but as yet has not done so. Will the Yuan’s new status be the signal for it to take action? We will have to wait for the ‘Golden Week’ to be over before we have an answer.

With prices looking for the bottom right now, we do expect to see demand from all gold quarters to move in to take advantage of the lower prices. But we do believe we are close to that bottom now.

This is what we think at Gold Forecaster and Stockbridge Management Alliance Ltd? We see the price very close to the Technical targeted bottom. We do see current price areas we see as a major buying opportunity.

Gold ETFs – There were small sales from the Gold Trust (IAU) of 0.323 of a tonne and from the SPDR gold ETF (GLD) yesterday, leaving their respective holdings at 947.629 tonnes and 227.23 tonnes.  The lower prices are still being absorbed by the investors in these shares.

Since January 4th this year, the holdings of these two gold ETFs have risen by 374.88 tonnes.

Silver – Silver prices are stabilizing after the tremendous fall from over $19 and will continue to do so, but should gold make another move soon, silver will follow at a faster pace.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance