Gold and silver looking for a bottom and creating buying opportunity

Gold TodayNew York closed at $1,268.70 yesterday after the previous close of $1,313.30.  London opened at $1,309.80.

    • The $: € was weaker at $1.1223: €1 from $1.1171: €1 yesterday.
    • The Dollar index was weaker at 96.06 from 96.15 yesterday.
    • The Yen was weaker at 103.11: $1 up from 102.34: $1 yesterday against the dollar.
    • The Yuan was weaker at 6.6820: $1 from 6.6745: $1 yesterday.


  • The Pound Sterling was weaker at $1.2732: £1 from yesterday’s $1.2775: £1.


Yuan Gold Fix:  Shanghai Gold Exchange is closed for week-long Golden Week holiday

Shanghai remains on holiday. New York prices continue to dominate and will until China returns.

No doubt both Chinese and Indian gold investors have tuned into the fall in the gold price, which is back to levels when they were buyers. All they need is to see the gold price stabilize then we will see them return to the market in force.

LBMA price setting:  The LBMA gold price setting was at $1,274.00 against yesterday’s $1,309.15.

The gold price in the euro was set at €1,135.27 against yesterday’s €1,173.39.

Ahead of the opening of New York the gold price was trading at $1,273.65 and in the euro at €1,134.96.  At the same time, the silver price was trading again at $17.86.

Silver Today –The silver price fell to $17.85 at New York’s close yesterday from $18.82, Friday.  

Price Drivers

We hear on one side that the reason for the fall in the gold price came from hawkish comments by a non-voting member of the FOMC, but that seems unlikely to us. We also heard that ‘rumors’ of a gradual termination of the E.C.B.’s quantitative easing program, but that needs more solid evidence for that to be believable.

We looked around markets to see that Shanghai is closed, London left it starting to fall through $1,300 but it was New York that hammered it down. We looked at the gold ETFs and saw no sales but a small purchase into the Gold Trust.  

What we did see was no real buying, which opened the door to COMEX speculators to test support heavily [non-physical] who hit it hard to trigger stop losses all the way down to $1,268. But again no physical selling!

This has left dealers between a rock and a hard place. If physical buying comes into the gold ETFs the dealers will have to lift prices very fast. If more COMEX sales some in all the market will check the Technical picture.

What do 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.

You are welcome to contact us at [email protected] should you wish to buy physical gold in forms that are dealable all over the world and we can hold them for you in a robust manner that we feel removes the threat of being confiscated. We’re the only storage company that can do that!

Gold ETFs – There were no sales or purchases from or to the SPDR gold ETF (GLD) but there was a purchase of o.55 of a tonne into the Gold Trust (IAU) yesterday, leaving their respective holdings at 947.952 tonnes and 227.23 tonnes.  This is quite remarkable considering the fall in the gold price of $44.60 on the day. We believe this means the gold price is going to be extremely volatile for a while.

Silver – Silver prices will fall in the short term and will go the same direction as gold but should turn faster than gold when it does.

Julian D.W. Phillips | | StockBridge Management Alliance

Shanghai Takes the Gold Pricing Lead

Gold Today –New York closed at $1,314.60 after the previous close of $1,313.60 yesterday.  London opened at $1,319 again.

  • The $: € was weaker at $1.1147: €1 from $1.1187: €1 yesterday.
  • The Dollar index was slightly stronger at 95.96 from 95.82 yesterday.
  • The Yen was slightly stronger at 101.50: $1 up from 101.76: $1 yesterday against the dollar.
  • The Yuan was slightly weaker at 6.6726: $1 from 6.6700: $1 yesterday.
  • The Pound Sterling was slightly stronger at $1.2998: £1 from yesterday’s $1.2989: £1.

Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
     2016  09  21

     2016  09  20







Dollar equivalent @ $1: 6.6726

$1: 6.6700





Shanghai ignored New York’s close and took the gold price higher by $10, no doubt reflecting the demand local investors demonstrated for physical gold.

Most importantly this is the first time of late, that substantial sales from the gold ETFs have not pulled gold prices down, but have been ignored to the extent that gold prices have risen.

LBMA price setting:  The LBMA gold price setting was at $1,319.60 against yesterday’s $1,315.40.

The gold price in the euro was set at €1,183.55 against yesterday’s €1,175.83.

Ahead of the opening of New York the gold price was trading at $1,324.60 and in the euro at €1,188.41.  At the same time, the silver price was trading again at $19.60.

Silver Today –The silver price rose to $19.23 at New York’s close yesterday up from $19.16, Friday.  

Price Drivers

There were substantial sales from the SPDR gold ETF yesterday, but Shanghai ignored it then London tried to pull prices back, to sit in the middle between New York and Shanghai.

This is only the second time Shanghai has walked its own road very clearly. Before, exchange rate changes could have explained the moves, but not this time. If this pattern is continued pricing power will be shifting to China from New York.

Why did this move occur now? The announcement from the Bank of Japan’s Kuroda basically did nothing for the Japanese economy. The policy moves we saw tell us that the Bank of Japan looks as though it has run out of ‘effective options’ to stimulate the economy there. With rates being held at current levels, we see the Bank of Japan unwilling to be seen furthering the ‘currency war’ by trying to lower its exchange rate. The moves by the BoJ were therefore at best hormone-free. This switches the attention back to the Fed’s FOMC meeting going on now.

In the light of all factors and Japan’s unwillingness to do anything solid, we cannot see the Fed surprising us by raising rates. Or can we? If they do, we do expect to see the dollar go stronger, albeit temporarily.

We are fully aware that the impact on the dollar exchange rates is a focal point for the FOMC. The U.S. cannot afford a strong dollar now. If the FOMC believe a rate hike of 0.25% will not affect the dollar’s exchange rate we may well see it happen. Otherwise, December will be the time when the Fed is more likely to make such a move.

Gold ETFs – There were sales of 3.858 tonnes from the SPDR gold ETF (GLD) but no sales from the Gold Trust yesterday, leaving their respective holdings at 938.753 tonnes and 223.51 tonnes.

Silver – Silver prices ignored the price action in gold yesterday climbing a little higher. Once again we say, ‘these are not the influences of fundamentals but U.S. silver investors expecting news that will send both gold and silver prices higher.’

Julian D.W. Phillips | | StockBridge Management Alliance

SGE gold withdrawals pick up a little – but still way down on a year ago

The latest announcement on gold withdrawals out of the Shanghai Gold Exchange (SGE) for August saw an increase on July withdrawals, but they remain hugely (45.5%) below those for August last year, although admittedly July, August and September 2015 saw exceptionally high levels.  If we compare the August figure with 2014 it was still 10.8% down.  Year to end-August withdrawals from the Exchange were a massive 28.6% down on the same period of 2015, but only 1% down on 2014 levels when the full year total was a little over 2,100 tonnes, although the current trend suggests that this level may not be reached this year.

Some equate SGE withdrawal figures as equivalent to total Chinese gold demand, although others dispute this suggesting there is a degree of double counting involved.  But be this as it may we do have a pretty good handle on Chinese gold imports together with china’s own gold output of around 450 tonnes a year, these come out as far closer to the sge withdrawals figure than chinese ‘consumption’ figures as estimated by the major precious metals consultancies.  The main difference is interpretation as to what is actually considered as ‘consumption’ which, for the mainstream analysts is a fairly specific universe which ignores gold imported for use by the financial sector.  To us this is till gold flowing into the Chinese mainland, and not coming out again, so should be incorporated in overall demand figures.

To put all this into perspective, China gold follower Koos Jansen, writing on, last year estimated Chinese gold imports, mostly as reported by Switzerland, the UK, Australia, the U.S., Canada and Hong Kong, at 1,575 tonnes to which should be added China’s domestic gold production of around 450 tonnes and a degree of scrap at an estimated 225 tonnes – so an overall total of 2,250 tonnes.  In 2015 SGE withdrawals totalled 2,596 tonnes which is far closer to known gold supply from Jansen which he reckons to be probably a minimum.

Shanghai Gold Exchange Monthly Gold Withdrawals (Tonnes)

Month 2016 2015 2014 % change 2015-2016 % change 2014-2016 
January 225.08 255.42 246.00 – 11.8% -8.5%
February* 107.60 156.36 171.67 – 31.2% -37.3%
March 183.24 213.35 146.56 -14.1% +25.0%
April 171.40 195.45 129.59 -12.3% +32.2%
May 147.28 162.15 129.34 -9.2% +13.8%
June 138.51 195.67 128.03 – 29.2% +8.2%
July 117.69 285.50 137.53 – 58.8% -14.4%
August 144.44 265.27 161.95 – 45.5% -10.8%
September 259.98 202.43
October 176.29 201.11
November 202.71 212.49
December 228.21 235.66
Year to end August 1,235.24 1,729.17 1,250.67 -28.6% -1.0%
Full Year 2,596.37 2,102.36    

Source: Shanghai Gold Exchange, 

*February withdrawals figures tend to be erratically low due to SGE closure during the Chinese New Year (Golden Week) holiday which this year was on the week commencing February 8th

But where does this all leave us in terms of Chinese gold demand this year.  We would suggest south of 2,000 tonnes according to the SGE figures.  With Indian demand also reported as sharply down so far this year the big Asian demand element is obviously slipping sharply, but this has been more than overshadowed by the vast pick-up in demand from the world’s gold-backed ETFs which the World Gold Council has estimated as being up by 679 tonnes to end-August.  What you lose on the swings one gains on the roundabouts (carousels to American readers!)

Gold and silver acting strong – David Morgan

Mike Gleason* interviews David Morgan about the recent consolidation in gold and silver prices.  Interestingly David felt there was some strength in the pattern we had seen which could kick in after the Labor Day holiday – a pattern which has already come about.  The interview was conducted last week, ahead of the G20 meeting and the weak economic data which propelled gold and silver upwards before and immediately after, the U.S. holiday.

Mike Gleason: Coming up we’ll hear from David Morgan of The Morgan Report and co-author of the book The Silver Manifesto. David tells us how long he thinks the correction in the metals will last, why he believes this November’s election is less important than you might think and also talks about a key event coming up that could put a lot of pressure on the U.S. dollar. Don’t miss a wonderful interview with our good friend David Morgan.

Well now, for more on the importance of sound money and what’s ahead for the markets, let’s get right to this week’s exclusive interview with the man they call the Silver Guru.

David Morgan

Mike Gleason: It is my privilege now to be joined by our good friend David Morgan of The Morgan Report. David, I hope you’ve been having a good summer and welcome back. It’s always a pleasure to talk to you.

David Morgan: Thank you very much, and yes, I have been having a wonderful summer. Thank you.

Mike Gleason: Well, as we begin here, David, please give us your thoughts on the recent pullback in the metals. We’ve maybe been overdue for a correction for a while now. I know in following your work, you’ve been calling for one, and we’re getting it here. And after a fantastic first six or seven months of the year for gold and silver, we’re finally starting to see some real selling pressure emerge. What is your take… what have you noticed during this mini-correction, and what are some of the reasons for the pullback?

David Morgan: Well, I’ll start with the reasons. In any market, even in a non-manipulated market, which there is probably none. The stock market, bond market, metals markets, futures markets, options… just about everything out there is geared and leveraged and pretty much manipulated by the trading algorithms, and other means, but regardless of that, all markets move up and down. Nothing goes straight up or straight down, and so there are periods where there’s profit-taking, there’s periods where there’s consolidation, that type of thing. So regardless of manipulated or not, all markets ebb and flow.

So the metals markets are no different in that aspect. What we saw in the silver market was over the last two months’ time frame, we peaked out in the spot month around the $20.50 area a couple times, and now we’ve dropped as far as about $18.50, so we’ve had about a $2 drop over the last couple of months. Specifically, the most recent drop’s really over a one month period. I want to be correct on that.

The idea that I’ve had is similar to many others, and we’re kind of overdue for correction as you stated, Mike. So this is actually a healthy thing. The metals stocks certainly have leveraged both directions, so anybody that’s invested in the resource sector, particularly gold and silver stocks, is going to see a multiple percentage-wise on the drop. And some of these stocks actually gave us a clue that the consolidation or the correction was coming, because some of these sold off before the metals actually had started to sell off. What’s interesting, Mike, is that the selloff, even though it’s been a fairly good drop, $2 on a $20 commodity, you’re looking at about 12% or so, hasn’t dropped the commitment of traders… or the open interest, I should say, on the commitment of traders… very much, which means that the bulls and bears are still pretty equal. There’s still a very strongly held commitments to the silver and gold paper paradigm that futures markets more than I would’ve seen in a very, very long time for this kind of a price drop.

So let me restate that. The $2 drop in silver and a correspondingly percentage-wise drop in gold, normally, you would see a pretty good sell off in the open interest. In other words, the shorts would be winning the battle. That is not what I’m seeing at this point in time. We could see something different after the Labor Day holiday. I’m not sure, but right now, these metals for the whole year, and even during this correction, are acting extremely strong.

Mike Gleason: So in your view, it sounds like the correction might not be terribly long lasting. Is that what I’m hearing?

David Morgan: Yes, not long lasting. Maybe another month. There’s a lot of things happening this month, as we’ll talk about later. The August low is habitually seasonality-wise very accurate for gold. You usually get the lowest price in gold in August. We’re doing this in the 1st of September, and September is usually a rebound month, but the seasonalities haven’t worked very well in the metals markets for quite some time, so I don’t put as much credence in them as I used to. However, in the end of the year, you’ve got a rise in the metals, and we haven’t seen that in a while either. I’m just going to let the market dictate, but here’s what I’ll say. The main support on the silver price is around the $17.50 to 17.60 level, so we might see another drop, and I really think that that level, another dollar down, is about as far as these guys are going to be able to push it down.

On the gold side, it’s holding above $1,300 which has fairly good support. Not really strong support, because time-wise, it hasn’t been above that level for a long time during this rally of the last six months. So I believe we’re going to see a huge effort to push gold below the $1,300 level, and we have to just see how it reacts, if it rebounds quickly or not. And of course, more important than that, pretty much at the volume that takes place. In other words, if that causes a large selloff and the algorithms start to move with the shorts and the longs decide to throw in the towel and starts a waterfall decline, then of course, I’ll do an update for The Morgan Report members, show that to them. Right now, it’s too hard to call that. I don’t see that. In fact, my suspicion is that that’s not going to happen. In other words, they’ll push it down below $1,300, but it will pop back up fairly quickly. So it’s very interesting to watch the metals this year.

Mike Gleason: Talking about some of those key events that are coming here over the next month. We’ve got the G20 Meeting coming up. I know you want to comment on that. Also, China’s going to be part of the IMF Special Drawing Rights. I believe it’s October 1st. Comment on those two international events there.

David Morgan: Certainly. I think it’s very important, and this is the big news of the month of September. One is that, I think it’s the 4th and 5th of September, China will be hosting the G20 Meeting for the first time in China. And I think they will be running the meeting pretty much. And at the same time, at the end of the month, I think it’s the 30th of September, the yuan will be weighted at about, I think it’s 10% of the SDR, Special Drawing Rights. So the international currency system run by the IMF, which is really run by the United States and International Monetary Fund, will be embracing the yuan as part of the SDR. And also, you will see a lot of settlement that will take place outside the U.S. dollar.

For example, petroleum historically has been settled in U.S. dollars only, and this has caused a great deal of the banking system throughout the globe to hold dollars so they could make settlements, because everybody buys oil. And now, you’re going to see settlement directly in yuan, which means that this is going to put downward pressure on the dollar, which could be a reason to raise interest rates. This thing about the economy’s great, we need to raise interest rates like we used to have back ten, twenty years ago, is preposterous. Anyone who takes just a cursory look at the real numbers and understands what’s really going on with shows like yours, mine, and many, many others, knows that there’s no way that the recovery has really ever taken place in any substantial way since the 2008 financial crisis. Sure, there’s been pockets here and there, but the overall economic picture’s really just gone sideways or gotten worse.

However, if there’s pressure on the dollar, they could use that meme, that idea, that propaganda, that, “Oh, look at the unemployment. Look at how good we’re doing,” and this type of nonsense, “Well jeez, we really have to raise interest rates,” when actually the reality is that because there is a further weakening of the dollar and there’s negative interest rates throughout the bond market on sovereign debt, but not in the U.S. yet, that it could happen. I’m not saying it will happen, but my thinking is a little different than almost anybody that’s in my peer group on this matter, Mike. Again, I could be wrong, I could be right, but I certainly want to voice it because I want to get people to think, and the only way to keep the dollar strong, let’s say “strong”, would be that it’s got a positive rate of return when all these other sovereign nations with the euro, et cetera, have negative rates, there’s going to be a move for people to hold dollars.

And because China’s coming into the fore, there’s a move to not want to hold dollars, so you’ve got these two forces, sort of bullish the dollar and bearish the dollar. Very interesting times. Lots is happening, and I want to make one more comment and that is, as much as China has taken on the gold market in fiscal form for many, many years and built their reserves probably far higher than what the official report, I do not believe that China is ready to pull the gold card yet. They are just now entering into the global currency system in a meaningful way. They’re very patient and I think they’re more willing just to continue with this paper paradigm. They certainly caught the Keynesian disease years ago that have done the money printing to build out their infrastructure and to certainly boost their economic picture, which is of course distorted at this point just like everywhere else that’s based on the Keynesian model. But nonetheless, I don’t think they’re ready to switch horses to a gold-backed yuan or anything like that any time in the very near future.

Mike Gleason: Certainly going to be interesting to see that push-pull play out there with the dollar. You bring up some good points there about strong dollar versus weak dollar. And I also want to get your thoughts on the election here. We’ve got the election season kicking into high gear. We’ll have the debates here pretty soon. We’re about two months away now from election day. What do you think a Trump victory would mean this November for the markets, primarily the metals since that’s what we’re focusing on here, and also what do you think a Hillary victory would mean?

David Morgan: Well my view is different than a lot of people, but you want my view, my view is it doesn’t matter. My view is that it’s changing captains on the Titanic. My view is that Trump seems to resonate with a lot of conservative thinkers and I think there’s many, many Americans that are just absolutely, totally, and completely disgusted with the political class. I do think that you can make arguments either way, who gets in could move the price and we might get a blip one way or the other depending on who’s elected or should I say, “selected”.

But regardless, I think in the longer term macro picture, it really means very, very little. I think we’re way too far gone on the debt paradigm overall that any one person no matter how well meaning they are, can really turn the boat, turn the ship. The Titanic has hit the iceberg. It’s taking on water, and you might get somebody stronger at the wheel and you might veer off, but it doesn’t really matter. The ship’s going down. That’s my view.

Mike Gleason: Switching gears here a little bit, you’ve always had great advice for people when it comes to getting into precious metals. You’ve written your ten rules of investing in the sector and I know owning the physical metal is first and foremost in your view. So before we get into discussion about mining stocks, which I’ll ask you about in a moment, talk about why you recommend owning the physical bullion before you do anything else.

David Morgan: Well almost anyone that’s in this sector, and that could go from anybody that’s a prepper or as extreme as a survivalist or someone that’s familiar with financial markets and monetary history, everyone understands that we’re at risk at all times, and especially now. We’re in a situation on a global basis we’ve never been in before, which is that the reserve currency of the world is failing, which means you need something outside of the system. You need something that’s not electronic-based, you need something that has no counterparty risk, you need something that’s universally recognized, and you need something of high value that could be used anytime, anywhere by anyone. That of course is gold and/or silver. This has been the case.

So if there were, let’s say, a problem with the banking system where we go to the report that’s for free on, you might go there, give me an email, and a first name. You’ll get the “Riches and Resources Report,” which shows you what happened during the currency crisis of 2000-2001 in Argentina. The film’s name is The Empty ATM, and they did not take your bank accounts. They just basically sealed them, where the money in the bank was held by the bank and they allotted you so much you could take out on a weekly basis no matter who you were, no matter what your account size was, and then they devalued the currency, which is basically stealing from you. So this is what took place.

I say all that to state how emphatic I am, how important it is for people to have real money outside of the system. Those people in Argentina that held some of their wealth in gold and silver circumvented the devaluation and also had readily available, recognizable and cherished real money that they could barter with, which took place all over the country in Argentina during that currency crisis that I just mentioned. So I really, really believe that this could take place in other areas of the world, certainly if you were in Venezuela right now and you had some precious metals, you might not have a smile on your face, but you certainly would be better off than the people that didn’t.

So these are really interesting times and we are in a paradigm that is failing and the powers that be are propaganda, propaganda, propaganda saying and telling everyone through the mainstream media that everything’s fine, go back to sleep, we’ve got it under control, things are wonderful, and that type of thing. When the reality of course, most people can just look out their window and drive down their main street of their town, take a look around and say, “You know, things don’t look as good as they did a decade or two ago.”

Mike Gleason: Are there any products that you prefer over others? For instance, in silver, do you generally recommend coins versus bars or coins over rounds? Does it even matter, or is it just about getting the most ounces for the money, or do you want variety? Give us your thoughts there.

David Morgan: Yeah, in the “Ten Rules of Silver Investing,” I said you should strive to get the most ounces per dollar you want, or whatever currency you have invested, which means first of all, small units. You definitely want to start with small units. You don’t want to have one 100-ounce bar, and that’s your silver holdings, because now you’re in a fix. You’ve got to make one absolutely correct decision when to turn it back into fiat currency or barter with it, whatever. So you want small coins if you have rounds, but if you’re particularly interested in recognizability, for example, and you want a government-stamped coin, you’re willing to pay a slightly higher premium, I have nothing against that.

Also, the constitutional silver or what’s known in the trade as “junk silver”, I think that’s still a good way to go. The bag market is actually fairly tight. So much has been smelted down into bars, there isn’t a lot of it around, actually. Small units. Rounds or recognizable coins are the way to go. I think you can start with silver if you’re modest means. If you have better means than that, I think you certainly should have some gold. You should actually have both if you can afford it.

And I also think moderation’s the key. I think a 10% holding in physical metal is probably more than is sufficient for most people. There are people like me that have a great deal more than that involved, but this is my life’s work. This is something I understand and I understand the risks, and I’ve been with that type of risk environment for a very, very long time. For most people, just a 10% amount in physical, and for those that really want to gain leverage and maybe triple their gains, certainly that’s available, but it’s a situation that demands study and work. And that would be through the Resources Sector, which is what we’ve specialized in for a long time.

Mike Gleason: Leading me right into my next question here, turning to the mining stocks. It’s been an outstanding year for the miners, the recent pullback notwithstanding. Now, if you look at the silver spot price, it’s up more than 35% since the first of the year, but if you look at the mining sector, gosh, David, we’ve got the HUI Gold Stock Index up nearly 100% for the year and the GDX is up over 120% year-to-date even with the big pullback in the last few weeks.

So things are finally starting to look up after a rough very few years for everyone in the Sector with many stocks down 80% of more since the 2011 peak, assuming they even stayed in business, but talk about the miners. What are you looking for here in the second half of the year after a great first half?

David Morgan: I’m actually looking for further gains by the end of the year. I think we’ve still got more work to do in the downside, and as I said earlier in your show, Mike, I think probably another month. I think by the time that the SDR takes place and people, the markets, I should say, understand how much dollar damage is done or not. We’ll have to wait and see. With the yuan being more accepted not only by the SDR but in final settlement rather than having to go to the dollar directly.

As that settles out, I think you’ll see more and more consolidation into the precious metals and more push for them to go to the upside. So it’s a situation that most of the large funds money managers, pensions even, that missed the 2008 bottom in the precious metals during the currency crisis, have woken up early this time and have moved into the paper paradigm of the gold and silver markets, which means that the open interest, as I said earlier on your show, is very, very high relative to what it’s been historically, and these are strong hands.

On top of that, the Shanghai Gold Exchange has a very, very large open interest themselves, and they’re trading from the long side vis-a-vis the commercials or the banking system that trades historically from the short side on the COMEX. So you’ve got big money that got in relatively early in both gold and silver, because they understand that the stock market is too high and they want to be hedged. They have no real philosophical reason to own gold like we just outlined in the last question, but they manage money and they need exposure. And the best way for them to get exposure is to buy it on a leveraged basis on the paper markets. So that’s what’s taking place. With the addition of the Shanghai Gold Exchange ramping up the amount they’ve purchased on paper, and of course, that’s much more physical marked than the COMEX is.

So again, there’s that really strong bull/bear back and forth and so, just to close out, I really don’t see these metals coming down a whole lot more or a whole lot longer, and I think this year is going to be one that people look back on and say, “Jeez, I’m sure glad I bought my metal or bought my mining shares during 2016.” By the way, The Morgan Report comes out this weekend right before the G20 Meeting, and on top of that, we’ve got another company that will be probably putting out mid-month, mid-September, an updated analysis, an appraisal on the mid-tier producers in the gold complex. And this is after it’s made two transformational acquisitions in 2016.

This is the kind of research we do. If you go back another month, we had like four or five speculative situations that are going to show up in these other newsletters that cost like three or four times what ours does. We see that all the time. Not that we certainly haven’t gotten ideas from others, because we have, but it seems that whatever we do our research on seems to be picked up by let’s say a lot of people in the industry. I’ll just leave it at that.

Mike Gleason: Well it’s great stuff as usual, David. We always appreciate hearing your thoughtful analysis here on our podcast, and I’m sure we’ll talk to you again very soon. Now, before we let you go, please tell folks how they can get involved with The Morgan Report, because this is a fantastic time for people to dive deeper into the metals and miners. I think they understood that by listening to our conversation here… it’s especially a good time after this recent pullback and this pause in the upward movement we’ve been having. Please let people know how they can get on your email list and also about some of the other things going on there at The Morgan Report or about the book, The Silver Manifesto.

David Morgan: Certainly. On the book, we’ve gotten great feedback from people. It’s probably one of the best $30 investments that you can make. You can get it on Amazon, you can go and read one chapter for free and get kind of an overview, you can read the reviews on Amazon. There’s a whole chapter on how to pick a mining stock, and we actually spill the beans and show you exactly how we do it. And again, we’ve gotten feedback that’s been extremely positive for those types of people that have the time, energy, and motivation to do their own analysis. We take you through step-by-step, so that’s something you can get out of the book along with a lot of other material.

As far as The Morgan Report, what I actually urge everybody to do is to just go to the website,, and get on our free email list, and get our free “Riches and Resources Report.” In that report, you’re going to get two movies to watch for free. One is The Empty ATM I mentioned earlier and the other one is The Four Horsemen film, which is the end of The Age of Empire, and it’s very, very good thought-provoking types that are interviewed during that paradigm with some solutions to the problems at the end of the film. And that’s just two things you get in that report. You also get ways to accumulate silver and gold over time, you get some insights, and of course, once you’re on the list, you will be appraised of an update every weekend by yours truly, myself and or one of my staff.

Mike Gleason: Yeah, it’s great stuff. I’ve been on your list for an awfully long time. Always enjoy it every weekend we get an email from you, and it’s excellent information. The Silver Manifesto, as you mentioned, is another great resource. We’ve sold about 1,500 on our website, A lot of people are really enjoying that book and I know you’re doing very well with that in a number of different places and we wish you continued success there.

Well thanks so much. We really appreciate it, and I hope you have a great weekend, enjoy the rest of your summer, and we’ll talk to you again soon. Thanks, David, and take care.

David Morgan: My pleasure. Thank you.

Mike Gleason: Well that will do it for this week. Thanks again to David Morgan, publisher of The Morgan Report. To follow David, just visit We urge everyone to sign up for the free email list to get his great commentary on a regular basis, and if you haven’t already done so, be sure to pick up a copy of The Silver Manifesto, available at, Amazon, other places where books are sold. It’s almost certainly the best resource on all things silver that you will find anywhere, so be sure to check that out.

And check back here next Friday for our next Weekly Market Wrap Podcast. Until then, this has been Mike Gleason with Money Metals Exchange. Thanks for listening, and have a great weekend, everybody


Gold and silver rising?

Gold TodayNew York was closed on Monday but closed at $1,325.60 on Friday after Thursday’s close at $1,313.30.  London opened at $1,330.

    • The $: € was almost unchanged at $1.1167 down from $1.1165 yesterday.
    • The dollar index was slightly weaker at 95.59 from 95.65 yesterday.
    • The Yen was almost unchanged at 103.26 from yesterday’s 103.28 against the dollar.
    • The Yuan was slightly stronger at 6.6800 from 6.6770 yesterday.


  • The Pound Sterling was stronger at $1.3338 from yesterday’s $1.3328.


Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
     2016  09  6

2016  09 5







Dollar equivalent @ $1: 6.6800

$1: 6.6770





After a lackluster day in London, when the gold price sat around $1,326 all day, Shanghai took the gold price higher to $1,330 and London held it there at the open. Will New York follow suit?

The Yuan was slightly weaker against the dollar once more. The pound continued to strengthen as you can see.

LBMA price setting:  The LBMA gold price setting this morning was at $1,330.05. Yesterday it was at set at $1,328.30.

The gold price in the euro was set on Tuesday at €1,191.05 up strongly on yesterday’s 1,189.91.

Silver Today –The silver price held its level while New York was closed at $19.36, after $19.39 yesterday.  

Price Drivers

With New York closed we saw London do nothing and then follow Shanghai this morning. With London being the center of physical demand and supply one would have expected London to lead the way, but is followed both New York and Shanghai. But we do need to see strong moves to see clearly which market holds pricing power. At the moment it is New York and has been for a long time. Gold itself wanted to drift higher, which should set the tone for New York today.

Another underwhelming G-20 meeting was held in Shanghai where only the nicest things were said about China’s hosting the event and the inclusion of the Yuan in the currencies that make up the SDR of the IMF.  Essentially, it is recognition of the present and growing use of the Yuan in the world monetary system. Having set that milestone in place we expect to see a steady erosion of the use of the dollar in global trade at the expense of the dollar over time.

We see the role of gold growing in this structural change largely being used to ‘smooth out’ the transition’.

In our next issue of the Gold Forecaster we will discuss just what strategy will tremendously increase your returns in a time when gold prices are rising and just how to maximize returns, when it is not.

Over in China, we note there is a number that is not issued and could well have a big impact on the volumes imported into China. While Chinese officials point to the withdrawals from the Shanghai Gold Exchange as a measure of imports into China, the size of gold holdings in the SGE are not published. It is possible that these could be growing solidly, increasing the levels of imports. While the People’s Bank of China uses SAFE and others to hold gold for them before these are included in “Official reserves” we note that the PBoC controls the SGE and may well also hold gold through the SGE? Usually “Official Gold Reserves” are imported separately and not included in SGE numbers but there is no reason why they should not be, in reality, part of these.

Gold ETFs – As New York was closed yesterday there were no sales or purchases into or from the SPDR gold ETF or from or to the Gold Trust, leaving their respective holdings at 937.89 tonnes and 225.39 tonnes.

Silver – The silver price is keen to follow gold but needs to see action in New York after the holiday yesterday before we see any big moves.

Julian D.W. Phillips | | StockBridge Management Alliance

Shanghai beginning to call the gold price tune?

Gold TodayGold closed in New York at $1,346.50 on Wednesday after Tuesday’s close at $1,346.10.  London opened at $1,352.

    • The $: € was very weak at $1.1329 from $1.1262.
    • The dollar index was weak at 94.35 from 94.96 Wednesday.
    • The Yen was stronger at 100.08 from Wednesday’s 100.76 against the dollar.
    • The Yuan was slightly stronger at 6.6324 from 6.6330 Wednesday.


  • The Pound Sterling was slightly stronger at $1.3144 up from Wednesday’s $1.3014.


Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
2016  08  18

2016  08  17







Dollar equivalent @ $1: 6.6324

$1: 6.6330





In almost a repeat of yesterday Shanghai was much higher than New York’s closing but London decided to walk its own road opening lower at $1,352. Dollar weakness continues heavily, as seen in the dollar index as well as against the euro. We are in a time when a large number of experts are calling the dollar higher, but it consistently does the reverse.

With emerging and higher risk nations offering higher yields, their currencies are strengthening and will continue to do so until we do actually see a rate hike [which we don’t expect until next year].

LBMA price setting:  $1,347.10 after Wednesday 17th August’s $1,342.75.

The gold price in the euro was set at €1,188.60 down €3.05 from Wednesday’s €1,191.65.

Ahead of the opening in New York the gold price stood at $1,350.15 and in the euro at €1,191.3.  

Silver Today –The silver price closed in New York at $19.66 on Wednesday down from $19.80 on Tuesday.  Ahead of New York’s opening the price was trading at $19.75.

Price Drivers

Yesterday saw heavy sales from the U.S. gold ETFs and this pulled New York prices down a little. Overnight saw prices rise in Shanghai which is leading the way lately, in setting gold prices.

Is it right to describe higher prices in Shanghai as a premium over New York/London’s prices or should we say that New York is trading at a discount to Shanghai?

The physical statistics says the second, but COMEX, until recently, led the way on gold prices. We are watching carefully to see if the pattern persists and if global markets take the lead in gold prices from Shanghai. This would mean that pricing power is moving to Shanghai. This is significant in that it alters the factors influencing the gold price, making them more globally oriented, as opposed to U.S. oriented. It would then make for a more believable gold price, both in monetary terms and physical terms.

The Fed Minutes described a split in the FOMC, but where the ‘hawks’ sat was on the non-voting side and the ‘doves’, led by Janet Yellen, sat on the voting side. The factors affecting the ‘doves’ were global influences as well as productivity, alongside wages. We can see that while the U.S. economy appears solid, the growth is low and not accompanied by a ‘healthy’ level of inflation. Hence the market views a rate hike in September with only a 21% likelihood and a hike early next year at a 50% likelihood. This prospect heightens the impact a rate hike will have on all global financial markets.

Gold ETFs – In New York on Tuesday there were sales of 4.453 tonnes from the SPDR gold ETF (GLD) but no change in the holdings of the Gold Trust (IAU). This left their respective holdings at 957.775 tonnes and 223.85 tonnes.

Silver –Silver prices should continue around current levels until there is a breakout in the gold price, one way or the other.

Julian D.W. Phillips | | StockBridge Management Alliance 


China’s SGE gold withdrawals YTD 25% down on 2015 but still in line with 2014

The latest announcement of gold withdrawals out of the Shanghai Gold Exchange, show something of a declining pattern month on month this year – and in cumulative terms are sharply down (25%) on the record 2015 withdrawal figures, but pretty much still on par with 2014.

SGE withdrawals are one measure of total Chinese gold demand – but are seemingly discounted as such by the principal Western precious metals research consultancies which seem to categorise Chinese consumption using some quite rigorous parameters which some feel hugely understate actual gold flows into the Chinese mainland.  The consultancies’ figures even come in comfortably below known Chinese gold imports from countries which report these, and certainly take no account of additional supply from Chinese domestic gold production – currently around 450 tonnes a year.  It seems that flows into the Chinese commercial banking system for use as collateral and in other financial transactions, which are by all accounts quite considerable are ignored in the consultancies’ ‘consumption’ analysis.

Interestingly, the Chinese central bank, The People’s Bank of China (PBoC), equates SGE withdrawals with total Chinese gold demand, while the consultancies maintain there is a degree of double counting in the SGE figures.  But, whatever the truth of the matter, movements out of the SGE, looked at month on month and year on year, are certainly an acceptable indicator as to how overall Chinese demand is faring.

Shanghai Gold Exchange Monthly Gold Withdrawals (Tonnes)

Month 2016 2015 2014
January 225.08 255.42 246.00
February* 107.60 156.36 171.67
March 183.24 213.35 146.56
April 171.40 195.45 129.59
May 147.28 162.15 129.34
June 138.51 195.67 128.03
July 117.58 285.50 137.53
August   265.27 161.95
September   259.98 202.43
October   176.29 201.11
November   202.71 212.49
December   228.21 235.66
Year to end July 1090.69 1,463.90 1,088.72
Full Year   2,596.37 2,102.36

Source: Shanghai Gold Exchange

*February withdrawals figures tend to be anomalously low due to SGE closure during the Chinese New Year holiday

As can be seen from the above table, last year’s record withdrawal figures were hugely boosted   by some very high monthly figures between July and the end of the year.  Past SGE withdrawals have tended to come in higher in the second half of the year, so subsequent monthly figures will be watched with interest to see if this kind of pattern continues in the current year, or whether Chinese demand remains depressed.  But it’s hugely unlikely that this year’s total will come anywhere near that of last year’s record.

GFMS blows hot and cold on gold

The latest GFMS Gold Survey Update taking Q2 figures into account doesn’t make for particularly positive reading for the gold investor in terms of fundamentals, but nevertheless the consultancy has upped its average gold price forecast for the year from what looks to have been a rather low estimate of $1,184/ounce to what might seem a still relatively conservative $1,279/ounce.  It should be recognised, however, that this is an average price forecast for the full year, and despite the headline spot price currently heading for the $1,350 level after a downbeat US GDP assessment, the actual average for H1 is still some way below this at around $1,219 based on LBMA figures, so this still suggests a second half average of close to $1,340/ounce to achieve this kind of level for the whole of the year.  Perhaps not quite so conservative after all!

So why do we say that the fundamentals do not look quite so positive as the relatively upbeat survey title might suggest?  That is because of a remarkable estimated downturn in gold’s principal demand sector – jewellery manufacture, particularly in gold’s two largest markets, China and India.  GFMS does come in for some criticism on its Chinese consumption statistics in particular, largely because of its definition of what actually comprises demand.  This actually comes in way below known Chinese gold imports and even further below withdrawals from the Shanghai Gold Exchange (SGE) which the Chinese Central Bank defines as Chinese demand in its Gold Yearbook.  The discrepancy is in part because GFMS consumption statistics ignore some very substantial gold flows into the banking and institutional sector, purportedly for use in financial transactions, but we have surmised they may also provide a back-door, and unreported, addition to China’s gold reserves given the country’s commercial banks are all state-controlled.  Certainly gold flows into China in total are way in excess of GFMS-estimated Chinese demand figures.

For China so far this year, GFMS reckons Chinese jewellery demand is seen as down by 31% year on year – the worst Q2 performance since 2009.  Investment demand is also seen as falling by 12% quarter on quarter for Q2.  Overall GFMS describes Chinese demand, as it calculates it, as being in freefall, although it is anticipating a pick-up in Q3.

While SGE gold withdrawal figures will also be substantially higher than the GFMS definition of Chinese gold consumption – they too are down sharply year to date as well by around 17% – which certainly confirms the trend noted by GFMS, if not the size of the downturn. Up until the end of June some 973.1 tonnes of gold had been withdrawn from the SGE.  Analytical consultancies like GFMS believe SGE figures include a significant degree of double counting, although some other analysts who follow these figures disagree saying SGE rules prevent this.

Chinese demand may also indeed be beginning to pick up, despite media headlines which look to suggest the opposite.  Hong Kong remains the conduit for perhaps around 60% of gold imports into the Chinese mainland and the May figure was the best for five months at 101 tonnes.  June did see a fall back to 68.7 tonnes but theBloomberg report headlined China’s Gold Imports Slide in June as Rising Prices Deter Buyers, where the headline suggested a major downturn in Chinese imports, rather glossed over the fact that even so the June figure was still more than three times higher than the figure for June 2015 – and 2015 was a very strong year for Chinese gold imports and demand!  The SGE withdrawals figure for the year was a huge new record at just shy of 2,600 tonnes – equivalent to over 80% of global new mined gold output.

GFMS also saw Indian jewellery demand as being even worse with jewellery consumption down 56% – and even globally it sees overall jewellery consumption down 27.3%.  It also puts global industrial demand as down by 7%, net official sector purchases down 48.5% (due primarily to reduced purchases by Russia and China in H1 coupled with sales by Venezuela) and global retail investment demand off by 2.6% overall.  To make things worse, despite seeing a 2% fall in new mine supply, overall supply is estimated as growing by around 6% due to an increase in scrap sales brought on by higher prices, and an increase in gold hedging activity.

The one bright spark in the supply/demand fundamentals balance has been the huge inflow into gold ETFs, totalling an estimated 568 tonnes in the first half of the year, so while GFMS sees gold in a supply surplus over the period, it has not been nearly such a severe one as the other supply/demand statistics might suggest.  But what if the ETF inflows start to reverse as they have been over the past week or two?  The likelihood could be a summer slump in the gold price, unless some global black swan event intervenes to regenerate more safe haven demand.  Or can sentiment alone hold the gold price at around current levels?  The FOMC meeting this week saw no indication of any timetable for increasing US interest rates, which gave the gold price a strong boost.  The latest US GDP growth  figures have also come in way below expectations, which may dim further expectations of a September US interest rate increase – and the feeling is the Fed won’t want to rock the boat ahead of the US Presidential election, which will likely see any interest rate rise decision to be postponed until December at the earliest.

What positives for gold does GFMS see?  It is now reckoning that new mined gold supply is definitely on the downward path.  There are relatively few new projects and expansions expected to begin producing this year to replace old mines closing down or those seeing lower grades, and those new operations in the near-term pipeline are generally fairly modest in scale, hence an opinion that global mine supply is now set to begin a multi-year downtrend this year.  But even if mine supply were to fall by 10% next year, which is probably a hugely excessive guess (the more likely figure would be 2-3%), this would only take 300 tonnes or so out of the global picture and unless Asian demand picks up again we could be heading for quite a major surplus.

But, even so, GFMS has raised its price projections as noted above, which means perhaps its analytical team is a little more positive than its figures might suggest.  It puts this down to political uncertainties ahead including the ongoing impact of the Brexit vote in the UK, reduced expectations of a rate rise from the Fed, a wobbly Italian banking sector and the U.S. Presidential race.

The full GFMS Q2 Gold Survey update is available for download to corporate email addresses at

The above article is a lightly edited and updated version of one published earlier this week on 

Asia Pushing Gold Higher and Silver’s on a Roll

Trading overnight on the Shanghai Gold Exchange (SGE) served to give the gold price a boost overnight last night.  The SGE’s am benchmark fix came in at the equivalent of US$1329.05 an ounce, around $10 higher than it had been trading on Western markets the previous day, and the pm SGE benchmark price came in higher at $1.335.27 on’s calculations – the site has a nice interactive tabulation of the SGE benchmark prices in various combinations of yuan, U.S. dollars, ounces and grams.

Whether the SGE uptick will start to show up in terms of a pick-up in Asian demand – notably in China where it appears to have been lacklustre so far this year – remains to be seen. But this could already be happening given net imports of gold into mainland China from Hong Kong (which currently accounts for around 40-50% of such imports), rose sharply in May to the highest level in five months at 115 tonnes.  If Asian demand does pick up – we will be watching mainland China gold import levels with perhaps added interest in the months ahead to see if there is a continuing improvement – and if gold ETF inflows continue at recent levels, there could well be even more of a squeeze in physical gold availability given inventories of available. non-attributable, metal in London and New York appear to be getting particularly tight.

The real precious metals beneficiary of yesterday’s gold move – indeed of gold’s overall performance over the past few weeks – has been silver, which for the first time since September 2014 has breached the $19 an ounce level.  Indeed its rise of around 6% over the past 10 days has been pretty spectacular.  This is also showing up strongly in the Gold:Silver Ratio (GSR) – effectively calculating the amount of silver it would take to ‘buy a similar weight in gold – which has come down to below 70 from a high of over 83 only around three short months ago.  silver had seemed to be relatively slow to move, but now it appears to have some momentum behind it.

As a result of silver’s increase, silver stocks – even before the latest big surge in price – had been probably the best performing stock market subsector year to date – See: Silver Stocks Best Investment YTD. Can They Continue to perform?.  But since I wrote that article only a few days ago they have, not surprisingly, continued to move sharply upwards alongside the boost in the silver price.  From the UK investor’s point of view, most of these major silver stocks are quoted in Toronto (TSX) and the USA (NYSE or NASDAQ) – the only major primary silver producers with UK quotes are Fresnillo (FRES) and Hochschild (HOC).  FRES is up 142% year to date and HOC 178%.  Another more diversified approach would be the Way Charteris Gold and Precious Metals Fund where silver stocks comprise a large part of its major investments.  After a pretty torrid performance over the past few years, this year to date it is up around 154% from the beginning of January.  These are impressive performances, but as usual with silver, while the upside potential is really positive, the downside risks are similarly large.  Silver tends to outperform gold when the latter is rising, but can substantially underperform on the downside.

Silver too, as a very small market sector in monetary investment terms, is also seen as being particularly prone to potential manipulation on the futures markets by a number of silver analysts and by virtually the whole community of out and out silver bulls.  They will point to a number of occasions, and particularly April 2011, when silver was on a roll and reached just short of $50 an ounce, where huge seemingly anomalous sales on the futures markets saw it crash – even when gold at the time was  to continue on an upwards path for another 4 months.

Both silver and gold have benefited quite strongly from the shock UK Brexit referendum outcome which has had some strange effects on markets in general.  Gold, and silver, have benefited, while the pound sterling has plunged, but the UK’s well-followed FTSE 100 Index, after a  stutter, recovered all its lost ground, and more.  It is currently up 5% on the past month at a new high for the year to date.  Few would have predicted that kind of outcome from a vote for the UK to leave the safety net of the EU.

But as cautioned, silver is a volatile metal to trade, and silver stocks perhaps even more so.  If gold continues to show some strength, there’s a good chance silver’s momentum could carry it yet higher still with the GSR continuing to come down.  If gold were to reach $1,400 or higher by the year end – as many analysts are now suggesting – silver and silver stocks could well be somewhere to put perhaps a limited section of your investment portfolio, but only a true gambler would risk all!


Shanghai leads gold price up, New York brings it back down – again!

Gold TodayGold closed in New York at $1,268.50 down from Wednesday’s $1,277.70. On Friday morning in Asia it rose to $1,274, as the Yuan steadied against a dollar at yesterday’s levels, before the LBMA price setting in London.

LBMA price setting:  $1,275.15 up from Thursday’s $1,268.30.

Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
2016  05  13

2016  04  12







Dollar equivalent @ $1: 6.5407

$1: 6.5414





Once again, Shanghai led the way higher after a lower New York close. The Gold Fixing in Shanghai’s morning was $3.60 lower than New York’s close but rose at the afternoon Fix confirming higher demand in Shanghai.

We still need a few days of price disparity to see who’s leading whom.

The gold price is narrowing its trading range but still dominated by exchange rates. It is also possible that both London and New York are not keen to stray far from Shanghai’s trading range either.

With Friday being the busiest day of the week, we will be watching to see if this is so.

Why is Friday the busiest day of the week? It’s because traders don’t just face a risk for one day but for three days, so trim their positions accordingly. For instance, if traders closed short positions and opened long positions to be ready for the weekend, in a market like today’s, where demand and supply are moving into balance, such changes could cause a strong move higher in the gold price and silver prices.

At this point in time the gold price could go either way in a strong move according to the Technical picture, in the very short term.   

The dollar index is almost unchanged at 94.33 up from Thursday’s 93.96. The dollar is also almost unchanged against the euro at $1.1348 up from yesterday’s $1.1409.

The gold price in the euro was set at €1,123.68 up from Thursday’s €1,111.67.

Ahead of New York’s opening, the gold price was trading at $1,275.8.00 and in the euro at €1,123.81.  At open, as has been the recent pattern, the price was brought back down quite sharply again.

Silver Today –The silver price closed in New York on Wednesday at $17.07 lower than Thursday’s $17.39. Ahead of New York’s opening the silver price stood at $17.12.

Price Drivers

As highlighted by the World Gold Council’s first quarter report demand for shares in the gold Exchange Traded Funds was massive and wiped out all the losses suffered in 2014 and 2015. This represents an about turn in U.S. institutional investor’s views on the gold price. This demand is continuing in the second quarter too.

Indeed, more and more U.S. institutional and private investors are turning to gold and silver now, as the global economy’s prospects dim.

In the E.U. an overall growth rate of 0.5% is being heralded as the first real recovery since 2008, topping the figures seen then. We would suggest that this is somewhat of a myopic view to encourage all, but ignores some broad, global fundamentals. If the markets believe the media ‘spin’ we will see a stronger euro. So far we haven’t!


Will the “Brexit” debate affect gold and silver prices? We don’t think so, unless or until it is certain Britain will leave the E.U. If the U.K. does vote to exit, there will be no impact on these prices. If they do, we are being warned of a plunging pound, a U.K. recession and the potential that other countries will leave too. But that is still a month away.

Gold ETFs – Thursday saw another 3.269 tonnes of gold bought into the SPDR gold ETF but nothing into the Gold Trust. This leaves their holdings at 845.189 and 197.78 tonnes in the SPDR & Gold Trust, respectively.  

Silver – The Silver price continues relatively stable and keen to move behind the gold price.

Julian D.W. Phillips | | StockBridge Management Alliance

Gold price slips in NA trading – but gold ETF holdings increasing

Gold TodayGold closed in New York Friday at $1,288.20 up from Thursday’s $1,277.30. On Monday morning in Asia it fell to $1,280.00, as the Yuan continued to weaken against a stronger dollar, before the LBMA price setting in London.

LBMA price setting:  $1,277.75 up from Friday’s $1,2805.25.

Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
2016  05  9

2016  04  6







Dollar equivalent @ $1: 6.5290

$1: 6.5177





The Shanghai Gold Fixings today were higher than New York’s close in the morning, but slipped in their afternoon back to around the close in New York, with London around the same level [allowing for the morning’s moves in exchange rates].  

Gold prices have moved only by a little amount, through the three centers, in the tight range of $1,277- $1,280. We continue to expect a strong move, once the gold price moves outside this range. We continue to expect the driving forces behind the gold prices to be exchange rates.

The dollar index is at 94.02 up from Friday’s, at 93.60. The dollar is stronger against the euro at $1.1387 up from $1.1426 on Friday.

The gold price in the euro was set at €1,120.47 up from Thursday’s €1,116.04.

Ahead of New York’s opening, the gold price was trading at $1,274.60 and in the euro at €1,119.34, but slipped further as U.S. trading got under way.  

Silver Today –The silver price closed in New York on Friday at $17.45 higher than Friday’s $17.34. Ahead of New York’s opening the silver price stood at $17.24.

Price Drivers

The jobs numbers from the U.S. last Friday were disappointing. In this environment it is most unlikely that we will see rate hikes anytime soon. Our view was that a maximum of two rate hikes would be seen in 2016. We continue to hold that view but if we are wrong it is more likely that there will be only one, or none. The ‘data’ will dictate how many! What is for sure is that if there is no rate hike in June, U.S. demand for gold will rise again.

China’s reserves of gold rise – China increased its gold reserves by 10.89 tonnes last month. We have come to expect around 21 tonnes a month increases over the last few months. We don’t think there has been a change in policy. As these reserves come mainly in the form of 400 oz bars, they would have to have been bought on the London market. We see China’s policy as taking what’s offered to them by dealers, so as to not chase prices. With the heavy U.S. demand ongoing, it may be that there was little on offer.

On top of that it is becoming clearer that not only is New York very low on physical gold, but London is moving that way. It appears that London is becoming more like COMEX every day, dealing in ‘paper gold’ on contracts that are closed out before they mature. That negates the need for physical gold.  

With Shanghai being a physical gold market, the osmotic pressure from China is on London and is slowly draining gold liquidity there. If this continues, there will come a time when London loses its pricing power and passes it to China. And that may be sooner than we think!

Gold ETFs – Friday saw purchases of 4.754 tonnes of gold bought into the SPDR gold ETF and another 1.05 of a tonne bought into the Gold Trust. This leaves their holdings at 834.194 and 196.43 tonnes in the SPDR & Gold Trust, respectively.  

The purchases of the last three business days totaled over 15 tonnes into these two gold ETFs and should continue to have a positive impact on the gold price.  HSBC, the custodian of the SPDR gold ETF has to buy physical gold in London when SPDR shares are bought, but when selling happens, they have a choice of where to sell, London of Shanghai. They cannot buy in Shanghai for U.S. delivery.

Silver – The Silver price continues stable and ready to move. It continues to mark time, waiting for gold to lead the way.

Julian D.W. Phillips | | StockBridge Management Alliance

SGE benchmark takes gold price higher overnight

Article first published on 

There will be arguments as to which came first – the overnight rise in gold price on global after-hours markets, or the Shanghai Gold Exchange (SGE) pm fix – but the latest SGE figure of CNY 261.88 was at the higher end of trading being equivalent to around US$1,258 at the current CNY/USD exchange rate.  Whether the SGE gold fix is leading, or following, the general price trend is thus open to question.  But perhaps the principal driver of the overnight rise in the gold price will have been the fall in the US dollar, with the Japanese central bank keeping its monetary policy steady at its latest meeting.  The Japanese yen thus rose around 2% against the US dollar, which has a significant impact on the US Dollar Index, which fell around two-thirds of a percent.

Needless to say, though, the move above the $1,250 level, which had been strongly resisted on the U.S. and London spot markets yesterday, was breached in the overnight trade.  The CNY price differential between the am and pm ‘fixes’ in Shanghai was around 0.7%.  The big question is can gold retain these kinds of levels, or even mover higher?  (At the time of writing the spot price is sitting at a little over the $1,257 level).  Or will it be brought down again by the big players on the futures markets who could have a lot to lose should the gold price surge higher in having to unwind some big short positions?

Today’s trading will be interesting.  The statement out of the FOMC yesterday was pretty non-committal with the latest deliberations suggesting no further interest rate imposition until later in the year – perhaps even not until Q3 or Q4 – although this was hardly unexpected.  Followers of Fedspeak noted that the latest statement made no mention of the possible adverse effects of a US$ rate rise on the global economy, and particularly on emerging markets, which could have an adverse impact on the US economy.  But as usual the Fed was marginally positive on U.S. economic growth, although its forecasting record on this has not been particularly impressive in the past.

Overall it looks as though the very low interest rate scenario will continue, at least for the remainder of the year, which in effect keeps them in negative territory in real terms.  Coupled with negative and zero interest rates throughout much of the rest of the world, all this remains positive for gold in the short to medium term, and probably into 2017 at least.  To counter this GFMS reports gold demand fell to its lowest level for 7 years in Q1, primarily due to weak Asian demand.  Indian demand fell ahead of anticipated positive changes in the tax position on gold in the budget – which did not materialise, and subsequently led to a jewellers’ strike which will also have depressed Q2 demand.  Chinese demand was also down – some of which will have been due to the timing of the Chinese New Year.  Chinese demand has been reported as picking up of late.  However GFMS sees gold falling back to below $1,200 in the short to medium term, but remain above cyclical lows.  So far the gold price has not been co-operative!

SGE Yuan Gold Fix Starts Tomorrow; GLD Purchases resume

Price Drivers

The long awaited Doha meeting of oil producers failed to produce the result the markets had banked on. With oil prices now promising to fall further and Iran increasing production as fast as it can, there is little hope of oil prices rising this year. Consequently, the markets are falling across the globe.

Both the dollar and the euro continue to remain at last week’s levels in quiet markets. Gold is trying to rise as uncertainties levels have jumped after Doha. We expect gold to trade in a narrow range at least in the early part of the week.

Tomorrow we see the start of the Yuan Gold Fixing in Shanghai. To get the price in dollars, one will have to take the SGE gold price and multiply it by 32.1507465 to get a price per ounce. Then divide this price by the $: Yuan exchange rate at the time of the Fix.

Gold ETFs – We saw more large purchases of 5,647 tonnes, after last week’s big sales of over 8 tonnes, of gold into the SPDR gold ETF but nothing in or out of the Gold Trust on Friday. This leaves their holdings at 812.462 and 188.04 tonnes in the SPDR & Gold Trust respectively.  These purchases were well placed to take advantage of what we expect later this week in the gold price.

Silver – The silver price is marking time waiting to run at the first sign of small recovery in the gold price.

Julian D.W. Phillips | | StockBridge Management Alliance


New SGE gold benchmark to come in next week

Will the new Chinese gold price benchmarking system, reported to be going live April 19th after some delays, fix the gold fix – or just be another fix in the worst sense of the word?  It has the potential to do either or both and, we suspect, in its earlier stages at least, attempt to do the former.

Reports out of Beijing, Shanghai, Hong Kong and Singapore suggest there will be 18 banks. gold traders and gold miners involved in setting the new twice-daily gold price benchmark in yuan per gram – which will have analysts reaching for their calculators.  But no doubt some enterprising website will run the calculations to convert the prices set into U.S. dollars per troy ounce on an effectively instantaneous basis for us given that it involves not only the gram to ounce conversion, but also the yuan to dollar one, the latter being potentially variable throughout the day.  One suspects that, at least initially, the calculations will show the yuan benchmark prices to be close to those set by the LBMA in London to present a degree of conformity.  But if, and when, the new benchmark gains good traction – and despite what GFMS may say, China remains by far the largest accumulator of physical gold putting India into the shade – so could the figures from London and Shanghai start to diverge, creating some interesting arbitrage opportunities, and putting additional pressure on the former.

The yuan benchmark is to be run by the Shanghai Gold Exchange (SGE), which in turn is a subsidiary of China’s central bank – the Peoples Bank of China (PBoC).  This will in itself raise concerns for the possibility of benchmark manipulation to suit China’s own purposes, which is probably why it will remain honest – and as transparent as these things can be – early on.  Otherwise it will have no credibility on global markets, although will still have on China which absorbs at least half the world’s annual production of new mined gold – probably more.

As to how the benchmark price setting will operate is still a little hazy.  According to the reports the SGE benchmark initial auction price will start as an arithmetic average of pricing inputs from the price setting members.  This differs from the LBMA gold price where the auction begins from a price set by the independent chairman.  Presumably, from there on the final price setting procedures will be somewhat similar.

Reports say that the SGE benchmark setting process will have 18 participating members – mostly Chinese banks (believed to be 10), plus gold trading, consuming and gold mining concerns, together with two foreign banks – named by Reuters as ANZ and Standard Bank, presumably to give the process a little more international credibility, much as the LBMA has brought Chinese banks into its process.    Apparently it is the foreign bank participation which has been the most difficult for the SGE to organise because of bank reluctance to be brought into a system which may not be as transparent as bank regulators would like it to be.

According to the Reuters report, the Chinese participants include: Industrial and Commercial Bank of China (ICBC), Agricultural Bank of China, Bank of China and China Construction Bank. Other regional banks to be involved are stated as Bank of Communications, Shanghai Pudong Development Bank, China Minsheng Banking Corp, Industrial Bank Co, Ping An Bank and Shanghai Bank. Additionally the participants are reported by Reuters to also include Bank of China (based in Hong Kong) retailers Chow Tai Fook and Lao Feng Xiang, Swiss trading house MKS and Chinese gold miners China National Gold Group and Shandong Gold Group.

Will this change the gold market – probably not in any significant way initially, but it may well lead to a system which gradually drags price initiation away from the COMEX paper gold market, which can only be positive for the gold sector.  However, as we have noted before, the vast majority of the SGE benchmarking members are Chinese, and thus effectively state-controlled, which could make market manipulation to an agenda which suits the Chinese government, whatever that may be, a distinct worry as far as the international financial community is concerned.  For example, with China currently seen to be building its gold reserves it may suit the Chinese to hold prices back while it is so doing, but once it has achieved its reserve objective it might then suit it to see prices rise – perhaps sharply.  To those who believe the LBMA gold price is something of a fix already then this could be out of the frying pan into the fire.  But then governments are always totally honest with their announcements and data aren’t they?!  So no worries there then!

The above is a lightly edited version of an I article I wrote for the Sharps Pixley website yesterday – see  Will the SGE gold benchmark fix the fix

Indian gold demand coming back on line as Chinese SGE gold ‘fix’ imminent

Gold TodayGold closed in New York at $1,256.10 down from $1,257.40 on Tuesday. On Wednesday morning in Asia, it fell back and continued to fall in London as the dollar strengthened. London saw the LBMA price setting at $1,245.75 down from $1,259.20 on Tuesday.

The dollar index is higher at 94.60 up from 93.84 on Tuesday. The dollar is stronger against the euro at $1.1309 up from $1.1419 yesterday.

The gold price in the euro was set at €1,101.56 down from €1,102.72 Tuesday.

Ahead of New York’s opening, the gold price was trading at $1,246.75 and in the euro at €1,102.05.  

Silver Today –The silver price closed in New York at $16.21 up from $15.90 on Tuesday. Ahead of New York’s opening the silver price stood at $16.13.

Price Drivers

Today sees the euro weaken and the dollar index rise as you can see above. The market is being moved by exchange rate moves, as physical demand in the U.S. is negative and, on balance, ETF shareholders were sellers of small amounts yesterday.

Reports of the leading U.S. institutions turning bullish on gold continue across the board targeting as much as $1,500.  The prime driver they record is the Technical picture. We do not argue with that, but add that there are several other factors that will contribute to the rise in the price of gold. Renewed Indian demand and next week’s Yuan gold Fix will be among those adding to the bullish tone of the market.

India – After 43 days of strikes which have produced nothing but losses for the jewelers the strike is off. Now we will see ‘official’ imports begin to flow again, into the country. These ‘official’ supplies flow through London to India. They will affect the London and New York gold prices.

It is always difficult to state India’s imports with any accuracy because of smuggling. And by their very nature, tonnages smuggled into the country cannot be accurately measured. But behind closed doors jewelers have continued production.

We see the 1% duty imposition as a side issue. The main issue is that all jewelers must now report their activities to the bureaucrats of the government. Until now, their activities have gone unreported. But the Indian ‘cash culture’ will ensure that the figures reported may well not reflect the true picture.

China & the Fix – Taken in isolation next week’s start of the Yuan Fix in Shanghai may well not have an immediate impact on the global gold price. Time will be needed for the system to settle in. But taken with the other moves made by China to influence the global gold price and we may well be on the brink of a very different gold market from now on.

Gold ETFs – We saw sales of 2.675 tonnes of gold from the SPDR gold ETF but a purchase of 0.48 of a tonne into the Gold Trust on Tuesday. This leaves their holdings at 815.138 and 188.04 tonnes in the SPDR & Gold Trust respectively.  This did not affect the gold price, which is reacting to currency moves.

Silver – The silver price is running full pelt ahead of gold only to pause when gold slips then runs again when it begins to rise.

Julian D.W. Phillips | | StockBridge Management Alliance


Chinese SGE gold withdrawals rise to 183.2 tonnes in March

For those avid watchers of the Shanghai Gold Exchange (SGE) withdrawal figures, those for the month of March came in at a respectable 183.2 tonnes – well above the rather abject February level (107.6 tonnes) which was kept down by the SGE’s closure over the Chinese Lunar New Year holiday, but well below that for January which saw a bit of a buying surge ahead of that holiday.  With Q1 gold withdrawal figures always affected by the timing of the New Year holiday period, which fell on February 6th this year, it is always difficult to draw any sensible conclusions as to what these early year figures mean in terms of likely total Chinese demand for the full year.

Looking at the total Q1 figure, this came in at 515.9 tonnes – 17.5% down on that for the Q1 figure for  last year when the full year total was a massive 2,596.4 tonnes, but it is a respectable figure nonetheless suggesting a full year total of over 2,000 tonnes for the fourth year in a row.

A big unknown here of course is how much the considerably lower growth in the Chinese economy, coupled with higher gold prices should they continue, or indeed rise further, will do for Chinese gold demand.  The Chinese are believed to be bargain hunters in terms of the gold price, climbing in when they perceive it to be weak – as witness the huge surge in demand in April 2013 when the gold price was knocked back very sharply indeed in the West, leading to what was then a big new record year for Chinese gold demand – since surpassed in 2015.

The performance of the Chinese stock markets will also be relevant – but whether the big fall from its peak last year (down over 40%) will encourage safe haven gold investment, or restrict demand because of loss of capital, is something of an unknown.  However fear of a possible gradual devaluation of the yuan against the US dollar as the country defends its export earnings, could well see a boost to gold demand.  We shall see.

For more analysis on the latest SGE figures click on Chinese gold demand picking up – 183.2 tonnes in March on