Brexit fallout: Gold, Silver Soar, Pound and Euro Plunge, Yen soars   

Gold TodayGold closed in New York at $1,257.50 down $8.70 on Thursday ahead of the start of voting in Britain.  This morning Asia took it up to $1,310 as they were the first market to ‘see’ the Brexit. At the opening on London the gold price the gold price pulled back to $1,319.

The $: € plunged lower to $1.1069 from Thursday’s $1.1336. The dollar index moved higher to 95.77 up from 93.48. It is a day when the dollar is stronger overall but weaker in the Yen. The Euro and Yuan were much weaker, alongside sterling.

Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
2016  06  24

2016  06  23







Dollar equivalent @ $1: 6.6236

$1: 6.5797





With the Yuan tumbling against the dollar, the gold price in Shanghai was much stronger and led the way for London’s pricing.

While investors can’t export physical gold, they can take a position in Shanghai ahead of London, take their profits and export those. In this way they can ‘arbitrage’, matching their ‘long’ positions in London at higher prices, should they wish.  Above shows that they could have taken a position in Shanghai, well ahead of London’s opening in physical then match the position in London selling out the Shanghai position in Shanghai afterward, before the close. Then it would have shifted the funds to London and not the gold. This makes the International side of the Shanghai Stock Exchange an integral part of the global gold market.

The positive Technical picture promises higher prices.  

LBMA price setting:  $1,313.85 up from Thursday 23rd June’s $1,265.75.

The gold price in the euro was set at €1,186.96 up €76.75 from Thursday’s €1,110.21.

Ahead of New York’s opening, the gold price was trading at $1,323.35 and in the euro at €1,195.92.  

Silver Today –The silver price closed in New York on Thursday at $17.33 up from Wednesday’s $17.27 a rise of 6 cents. Ahead of New York’s opening the silver price stood at $17.93.

Price Drivers

The unexpected happened ! The paw paw hit the fan! The drama erupted at 7.00 a.m. London time and began to be discounted in Shanghai before London opened.

We have just witnessed an earthquake of over 8 on the global, monetary Richter scale.

Will we see a Frexit [Marie le Pen has just called for a French referendum and Spain may follow as could the Netherland…….], a Spexit, a Nexit……? This could prove a mortal blow to the E.U. and eventually leave just the strong members remaining, implying, very long term, a much stronger euro.

The biggest hit was taken by the banking sector as shares in leading banks dropped 20 to 30% at the opening. We are reassured that the banking sector can survive these crises, by Mark Carney, Governor of the Bank of England who pointed out that the banks in the U.K. have raised over 100 billion pounds in capital, while the Bank of England stands ready to provide additional liquidity of another 250 billion pounds in support.

We wondered why they did not resort to the imposition of the dollar premium, as they did in a similar crisis in 1971. Then we realized that the provision of so much more liquidity did more.

  • It permitted a tumbling of sterling [improving the U.K.’s international competitiveness [while joining the currency war].
  • It set the U.K. on a Quantitative Easing path of major proportions.
  • It abandons concern for the exchange rate and stability of Sterling’s value in currency markets facilitating a weaker exchange rate. This suggests a steadily falling pound sterling in the weeks/months ahead.

We recognize that this is why the Fed waited before considering a rate hike. We don’t expect one until the end of 2016 at the earliest, if then. More to the point, we are aware that the Fed/Treasury will not be happy with a strengthening dollar and may well act to counter it, just as we expect the Bank of Japan to intervene in the foreign exchange markets to lower the exchange rate of the Yen.

Please note that gold has only, so far recovered to where it was a month ago at its recent peak. The changes wrought by Brexit promises to take gold higher long term.

Gold ETFs – On Thursday the holdings of the SPDR & gold Trust remained the same as did those of the Gold Trust at 915.898 tonnes and at 201.91 tonnes respectively. We expect that to change today!  

Since January 4th this year, the holdings of these two gold ETFs have risen 321.022 tonnes.

Silver –Silver prices are going to sprint ahead of gold prices now that the way forward higher is now clear.

Julian D.W. Phillips | | StockBridge Management Alliance


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