Gold & Silver retreat to support before recovery

Gold Today –Gold closed in New York at $1,281.70 down $9 on Thursday falling back to support, then rose slightly in Shanghai to $1,284 before rising slightly again at London’s opening.

The $: € moved slightly lower to $1.1254 from yesterday’s $1.1260 overnight. The dollar index moved to 94.38 down from 94.48.

Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
2016  06  17

2016  06  16







Dollar equivalent @ $1: 6.5995

$1: 6.5982





Shanghai was in synch with New York and London then followed suit this morning as the gold price pulled back in a normal market reaction as a sense of proportion calmed fears slightly across world markets. Having said that, the reaction was just a normal reaction not a change of sentiment or perception of what lies ahead at the end of next week in the Brexit vote.

$1,280 is now support and that is holding. Physical gold buying continues strongly in the U.S.

Global financial markets, while more positive today, continue to be discounting an exit of the U.K. from the E.U. and the consequential turmoil now expected. The tragic killing of the U.K. M.P. over the Brexit issue is shocking now, but will fade in the next week and be insufficient to change the minds of voters. While financial common sense says, ‘stay in’, the immigration issue is what voters at ground level are looking at. Is it a case of the rule of the lowest common denominator? Next week will give us that answer!

Of more relevance to the gold price is the way all global financial markets are moving is being attributed to the Brexit issue. Don’t you find that tells us something? If the financial world is so focused on this issue, surely they must be in an extremely fragile state? This points to a far more structural set of problems, which will not go away if the U.K. votes to stay in the E.U. It will simply postpone the crisis that sits above us like the sword of Damocles. When the sword strikes, gold and silver prices will rise very strongly.

LBMA price setting:  $1,284.50 down from Thursday 16th June’s $1,307.00.

The gold price in the euro was set at €1,141.12 down from Wednesday’s €1,164.37.

Ahead of New York’s opening, the gold price was trading at $1,289.00 and in the euro at €1,144.46.

Silver Today –The silver price closed in New York on Thursday at $17.17, up from Wednesday’s $17.54 a fall of 37 cents. Ahead of New York’s opening the silver price stood at $17.41.

Price Drivers

We commented above that the underlying problems facing the financial world are considerable in a very fragile set of markets. It is against these that the “Brexit” vote is set. Just how considerable are these?

In the E.U. German Bunds are offering a negative yield and yet inflation and growth are at alarmingly low levels. After all the quantitative easing being thrown at the Eurozone financial markets, by now we should have seen significant results.  We haven’t. Over in the U.S. the results quantitative easing produced, we feel are limited to the banking system with the U.S. economy simply having access to cheap funds, which were not always available for the purpose they were intended. It certainly cannot be designated as the savior of the U.S. economy.

In Japan, quantitative easing has failed miserably as demonstrated by what appears to be a halt to further stimulation.

At the same time, Debt to GDP Ratios have escalated across the world with in some instances national insolvency evident. But the fact that no-one has called the debts implies solvency.

The above clarifies why the global financial markets are so fragile and why if Brexit doesn’t trigger a crisis, something else will.

Gold ETFs – On Thursday the holdings of the SPDR & gold Trust rose another 1.782 tonnes as the physical buying continued into the gold ETF, leaving its holdings at 902.532. Another 0.75 of a tonne of gold bullion was added to the Gold Trust, leaving its holding at 198.40 tonnes.

Since January 4th this year, the holdings of these two gold ETFs have risen 304.164 tonnes.

Silver –Silver returned to its usual behavior and fell back with gold. We cannot see this pattern of behavior changing in the future. Silver will go further each way, but the same way as gold, irrespective of the fundamentals. Today, we expect gold to rise and silver will rise further!

Julian D.W. Phillips | | StockBridge Management Alliance


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