And still the U.S. gold ETF buying goes on

Gold TodayGold closed in New York at $1,240.90 up from $1,232.70. In Asia on Thursday, it held slightly higher at $1,241 ahead of London’s opening. It then held there to be set by the LBMA at $1,241.95 up from $1,229.35. The dollar index is slightly lower at 98.21 down from 98.45.

The dollar is down against the euro at $1.0879 from yesterday’s $1.0853 on Thursday. The gold price in the euro was set at €1,141.60 up from €1,132.78.

Ahead of New York’s opening, the gold price was trading at $1,243.25 and in the euro at €1,142.80.  

Silver Today –The silver price closed in New York at $14.95 up 11 cents.  Ahead of New York’s opening the silver price stood at $14.95.

Price Drivers

Equity markets continue to rally today. But as the trading range tightens and the gold price moves to the top of the trading range, the prospects of a strong move happening comes closer. The tightening of the trading range implies a balancing between U.S. COMEX gold market buyers and sellers. Just as with a see-saw, once in balance, it takes a tiny amount on one or the other side to make the see-saw to move strongly one way or the other. We expect the trigger for this move to come out of the U.S.

London’s gold market is being bid for and there are two main contenders, apparently, the LME and the CME. The LME is owned by Hong Kong Exchanges and Clearing giving London a direct link to the Chinese market. For the London Bullion Market Association to remain relevant, it needs a link to the biggest physical gold market in the world. For it to go CME’s way it would be tied to the U.S. primarily paper market. Just as London is the developed world’s hub for Yuan trading so a tie to China’s gold market through the LME would keep London ‘relevant’ in the global gold market. This would enhance the structural reforms of the gold market being carried out in China and London right now.

So, if the bid goes the way of the CME, we would expect a divided global gold market. If the way of the LME we would expect the London gold price and the Shanghai gold price to far better reflect the demand and supply fundamentals than is the case at the moment!

Indian Gold Markets are on strike! As of now the Indian gold market is on strike against the 1% gold sales tax. This means that 35,000 jewelers across India including 7,000 in Chennai have downed tools.

The last time such a strike occurred, the government backtracked. Will they this time?

Gold ETFs An amount of 2.379 tonnes was bought into the SPDR gold ETF and a purchase of 0.27 of a tonne into the Gold Trust. The holdings of the SPDR gold ETF are now at 788.574 tonnes and at 190.14 tonnes in the Gold Trust.   But yesterday was different than the other days we saw in the week, because the equity rally continued and yet so did the gold buying.

Silver – The silver price lowered its volatile swings yesterday an rose with gold but still remaining under $15.00. If gold does jump $20 or just under 2% silver is likely to jump around 5%.

Julian D.W. Phillips | | StockBridge Management Alliance