Shanghai gold fix

Gold falls despite big continuing physical buying in the U.S.

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Gold Today –Gold closed in New York at $1,232.70 down from $1,234.00. In Asia on Wednesday, it fell to $1,224 ahead of London’s opening. It then rose further to be set by the LBMA at $1,229.35 down from $1,240.00. The dollar index is slightly higher at 98.45.

The dollar is up against the euro at $1.0853 up from $1.0857 on Wednesday. The gold price in the euro was set at €1,132.78 down from €1,140.44.

Ahead of New York’s opening, the gold price was trading at $1,231.00 and in the euro at €1,134.25.  

Silver Today –The silver price closed in New York at $14.84 up 4 cents.  Ahead of New York’s opening the silver price stood at $14.85.

Price Drivers

Equity markets have been rallying this week and may well continue to do so today. Dealers continue to pull gold and silver prices back in expectation of price falls while these equity rallies continue across the world. But this is not warranted in terms of the demand and supply of gold.

Dealers do not respond to physical buying as we explain below [ETFs], the Technical picture continues to describe a tightening of the trading range. We were premature in calling for a big price move either way coming, but the Technical picture continues to support our view that we are getting closer to that move.

Gold ETFs In yet another amazing week for gold demand in the U.S. and after Monday’s huge purchase of gold into the SPDR gold ETF of 14.869 tonnes we see another 8.921 tonnes bought yesterday and a purchase of 0.450 of a tonne into the Gold Trust. The holdings of the SPDR gold ETF are now at 786.195 tonnes and at 189.87 tonnes in the Gold Trust.   And yet because of better data out of the States and an equity market rally, gold fell.

Readers may feel that when there are such purchases the U.S. price of gold should rise automatically. But that’s not the way it works. HSBC is the Custodian of SPDR gold, so when the SPDR asks it to acquire gold for the company, HSBC must go into the physical market to buy it. It goes primarily into the physical market, most likely in London [if not from its own sources] to get it – not into the U.S. to get it. As a result, such demand does not impact the U.S. price of gold, initially. Now you have a situation where the supply and demand picture in gold is not reflected in the U.S. gold price, despite the fact that it is U.S. buyers of physical gold that are buying so much. Yes, it is inevitable that at some point their buying will reflect in the gold price.

This makes the establishment of the Yuan gold price “Fixing” in Shanghai after April 19th so important to the future gold price.

Silver – While the silver price has re-affirmed its relationship with the gold price, it remains more volatile than gold both ways. Clearly, for short term trading silver can be more rewarding or damaging, than gold, but we bear in mind that long-term it continues to be treated as a monetary metal.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

Gold price resilient and set for an interesting year

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How things have changed in terms of market sentiment towards gold in just a couple of months!  Heading into the end of 2015 virtually every bank analyst was predicting doom and gloom for gold as Fed rate rises would make holding gold less and less attractive.  They were falling over each other to predict ever lower prices – $1050, $1000, $900 or even less.  The only way was down.

There were some marginally conflicting analyses coming out – but only marginal – most seeing a continuing downturn in the first half or three quarters of 2016 but perhaps something of a pickup towards the year end.  But this all made depressing reading for the gold investor despite some fundamental supply/demand factors suggesting that this outlook might have been too pessimistic…

The above are the opening paras from an article I have just published on news.sharpspixley.com   To read the full article click here

Gold in high risk area but possibility of hefty bounce

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New York closed at $1,107.50 down $10.20 on Wednesday. In Asia it rose to $1,110.00 before London opened. The LBMA price setting fixed it at $1,107.30 down from $1,118.00 yesterday. The dollar Index was stronger yesterday and rose to 97.94 up from 97.36 at the close of New York. The dollar was stronger at $1.0861 up from $1.0931 against the euro.  In the euro the fixing was €1,019.71 down from €1,023.25.  At New York’s opening gold was trading in the euro at €1,021.56 and at $1,111.15.

The silver price closed at $15.09 down 20 cents over Wednesday’s close. At New York’s opening, silver was trading at $15.07.

Price Drivers

Technically, the gold price is pointing lower. But still we remain in a high risk area with the possibility of a hefty bounce.

Tuesday saw sales from the SPDR gold ETF of 6.199 tonnes making over 16 tonnes sold this week but nothing was sold from the Gold Trust leaving their holdings at 680.105 tonnes and at 160.30 in the Gold Trust. These sales were sufficient to cause such an ongoing fall in the gold price and if they continue, expect more falls.  On top of that the Commercials are short again.

What investors and traders should be working out now is the impact of the arriving Yuan Gold Fixing in Shanghai.

Bear in mind that it is entirely a physical market with only a minor influence from Futures and Options trading. If, for instance, Futures and Options positions are taken out on a delivery basis then whoever is left holding the position will have to deliver.

So who will be left holding the baby as maturity approaches. For sure, speculators who have no intention of delivering will ensure they are out well before maturity. This will lessen the impact of COMEX on the gold price. The arbitrage trade between the two centers will blossom and further squeeze the influence of both London OTC trading and New York’s COMEX.

With gold likely to return to a greater role in a multi-currency system we would expect developed world selling by institutions to be curtailed so as to keep hold of the gold they have.

The acceptance of the Yuan in the basket of currencies making up the SDR will be the trigger for such developments detailed above.

Julian D.W. Phillips for the Gold & Silver Forecasters- www.goldforecaster.com and www.silverforecaster.com

Will gold fix in yuan take over from London?

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Julian Phillips’ latest gold and silver market commentary and what he sees as the main market drivers with Indian imports running at high levels

New York closed at $1,188.80 on Monday. Asia held it there and so did London. The LBMA Gold price was set at $1,187.40 up $8.40 on Friday. The euro equivalent stood at €1,070.69 up €23.62 while the dollar was stronger at $1.1090 up from $1.1260 against the euro. Ahead of New York’s opening, gold was trading higher in London at $1,187.60 and in the euro at €1,069.09.

The silver price closed at $16.42 up 26 cents on Friday’s level. Ahead of New York’s opening it was trading at $16.40.

Yesterday saw very little gold trading done in New York with London closed for the Bank Holiday. The dollar is rising today with the dollar index at 95.80 up from 94.64 yesterday as did the dollar at $1.1084 from Friday’s $1.1269. There were purchases of gold into the SPDR gold E.T.F. of 2.389 tonnes on Friday but none yesterday and none from or into the Gold Trust on Friday or Monday. The holdings of the SPDR gold ETF are at 741.750 tonnes and at 165.58 tonnes in the Gold Trust.

With the dollar’s correction now seemingly over, we expect to see it rise against all currencies again. This time it is possible to see the dollar reach $1: €1. But other currencies such as the Yen may fall further against the dollar.

Indian imports of gold in the first quarter of the year has been reported as up by 19.5% for the 2014-15 year, according to the Reserve Bank of India. Bullion imports rose to $34.32 billion for the 2015 year ending in March, up from $28.7 billion imported in the fiscal 2014. This is roughly 900 tonnes in the last year against roughly 750 tonnes in the previous year. Please note that these figures exclude smuggled gold, which could be 250 tonnes +.

The rise in imports is moving faster now as confirmed by the Commerce Ministry, which reported imports nearly doubling in March to $4.98 billion or roughly 130 tonnes. The implication of this figure, if imports continue to rise throughout the year at this pace, could lead to imports hitting 1,200 tonnes, excluding smuggled gold. While duties of 10% persist, smuggled gold will continue to pour in, particularly if the developed world markets hold prices around the $1,200 level.

Taking Chinese demand at the level we saw last year together with Indian demand, we see a figure way above total newly mined production levels. Add all Asian demand and Middle Eastern demand and we see them taking all available gold in the markets if prices remain down.

This adds a large question mark over using the LBMA Gold price as a reference price for gold contracts. Later in the year we will see a Yuan Gold Fix. If that comes in at a higher level, when translated into dollars, we wonder if the Yuan gold Fix will be used as the reference price for contracts?

Julian D.W. Phillips for the Gold & Silver Forecasters – www.goldforecaster.com and www.sillverforecaster.com