Gold and silver markets: Asia rising – all positive

Gold TodayGold closed in New York at $1,260.80 down from $1,262.20 on Friday. In Asia on Friday, it moved higher until the LBMA price setting was set at $1,267.60 down from $1,271.50 on Friday. The dollar index is slightly higher at 97.61 up from 97.52 on Friday.

The dollar is up against the euro at $1.0963 from $1.0981 Friday. The gold price in the euro was set at €1,156.25 down from €1,157.91.

Ahead of New York’s opening, the gold price was trading at $1,270.00 and in the euro at €1,158.44.  

Silver Today –The silver price closed in New York at $15.49 up 27 cents.  Ahead of New York’s opening the silver price stood at $15.67.

Price Drivers

China has debt which stands at 250% of GDP. This sounds unsustainable, but because it is mainly internal it is under its control. So expect to see more corporate local debt become government debt in the months to come. The corporate dollar debt is being paid down, so capital outflows should be seen not as capital fleeing lower growth, but mainly debt reduction. What does this say for gold? It clarifies that middle classes will continue to grow and that China will not have a ‘hard landing’. This comes from the Government conference being completed now. This remains gold positive.

Gold ETFs An amount of 0.215 of a tonne was sold from the SPDR gold ETF and a purchase of 0.3 of a tonne was bought into the Gold Trust before trading was suspended in the Trust, pending permission to issue more shares is given. The Trust remains healthy and likely its shares will trade at a premium before permission is gained to issue more shares. The holdings of the SPDR gold ETF are now at 793.117 tonnes and at 191.07 tonnes in the Gold Trust.  The sale out of GLD was outweighed by the purchase into the Gold Trust. Neither had an impact on the gold price!

The gold price, once again, was pulled back in New York this time by over $11 by dealers fearing more selling. But such pullbacks in volatile markets simply incite more physical buying. There does come a point where New York’s prices are pulled up by physical buying an example of which we saw last Friday, when the LBMA gold price setting was higher than market trading at $1,271.50. In addition short covering continues with COMEX increasing its long positions now.

We do see gold and silver markets remaining very volatile in the coming week as liquidity levels remain under visible pressure.

China Construction Bank joins the LBMA silver price – CME Benchmark Europe Limited and Thomson Reuters have operated the LBMA Silver Price since August 2014 when they took over responsibility from the London Silver Market Fixing Limited. CCB will be the first Chinese bank and the sixth price participant, joining HSBC Bank USA NA, JPMorgan Chase Bank, The Bank of Nova Scotia, The Toronto Dominion Bank and UBS AG.

We expect a similar announcement to be made shortly for the ICBC to be made a clearing member of the LBMA gold price.

This is yet another step in the various stages of gold and silver market re-structuring by China as it moves structures to a truly global gold and silver price and away from one dominated by COMEX and London.

We see the major changes in both the global monetary system and the precious metal markets as fundamental and long-term. The world is changing and truly going to reflect the rise of Asia.

Silver – The silver price is running forward ahead of gold and should continue to do so.

Julian D.W. Phillips | | StockBridge Management Alliance

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