First significant sale from GLD for several weeks. Price falters.

Gold Today –Gold closed in New York at $1,261.40 down from $1,268.00 on Tuesday. In Asia this morning, it moved lower to $1,257 at one point and then in London until the LBMA price setting was set at $1,258.25 down from yesterday’s $1,274.10. The dollar index is slightly higher at 97.37 down from 97.17 on Tuesday.

The dollar is up against the euro at $1.0963 from $1.1009 on Tuesday. The gold price in the euro was set at €1,143.83 down from €1,157.33.

Ahead of New York’s opening, the gold price was trading at $1,254.1 and in the euro at €1,143.78.  

Silver Today –The silver price closed in New York at $15.36 down 29 cents.  Ahead of New York’s opening the silver price stood at $15.30.

Price Drivers

E.U. With Draghi of the E.C.B. shortly to announce more stimulus measures, skeptics are having their day. After all this time and after so much monetary stimuli has been injected into the Eurozone the results have been disappointing, so will larger negative interest rates and more QE do any better? What have been the results to date? Even after the central bank pumped about €720 billion into the region, manufacturing dropped to its lowest level since 2013, the inflation rate turned negative, and consumer confidence worsened.

With debt to GDP levels rising, the warnings from the BIS & IMF about the storms coming are on the brink of coming to pass.

Gold ETFs There were sales of 2.378 tonnes of gold from the SPDR gold ETF (GLD) but purchases of 0.45 of a tonne into the Gold Trust (IAU) yesterday. This is the first time in recent weeks we have seen sales of size from the SPDR gold ETF. It certainly helped the gold price to slip down.

What happen when such sales takes place is that HSBC, the Custodian of the Fund, can then sell that into China straight away and yet it won’t impact on London or New York prices. But HSBC cannot do the reverse by taking gold from China and selling it in London as it is illegal to export gold from China. And this is why selling in a market where globally, buying far outweighs selling, prices can be made to fall. It continues to favor buying in Asia when this happens.

So while there are cries of “manipulation” to hold prices down, the evidence is that the structure of the gold market globally favors Asia continuing to buy gold at very low prices. While the banking and currency systems favor gold remaining out of favor, what is happening now is a ticking time bomb, taking us to the point where Asia controls the gold market and soon the gold price.

We continue to see gold and silver markets remaining very volatile in New York in the coming days as liquidity levels remain under visible pressure. However, after yesterday, we expect the volatility to come in, taking gold higher. Bear in mind, please, that physical gold buying in these markets does not create ‘spikes’. We expect COMEX to cause volatility as liquidity pressures continue, while London calms the market.

Silver – The silver price is on the back foot now waiting for gold to go higher.

Julian D.W. Phillips | | StockBridge Management Alliance


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