Gold exchanges battling it out for leadership

Gold TodayGold closed in New York at $1,337.90 on Thursday after Wednesday’s close at $1,346.70.  London opened at $1,337.

    • The $: € was slightly weaker at $1.1156 from $1.1144.
    • The dollar index rose slightly to 95.83 from 95.82 Thursday.
    • The Yen was slightly stronger at 101.04 from Thursday’s 101.28 against the dollar.
    • The Yuan was weaker at 6.6440 from 6.6406 Thursday.
    • The Pound Sterling was slightly weaker at $1.2956 down from Wednesday’s $1.2958.


Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
2016  08  12

2016  08  11







Dollar equivalent @ $1: 6.6440

$1: 6.6406





Shanghai took the gold price closing in New York higher more in line with the higher Shanghai price the day before. London then ignored Shanghai prices and opened at New York’s close. At the moment we are seeing a small battle between the developed world centers and Shanghai the physical market.  This battle can be resolved provided the arbitrageurs in the market do their job. They can’t move gold but can adjust their positions with currency plays.

We will be discussing the state of the gold market in China in particular the Commercial Bank gold market there, in our coming newsletters.

We are rapidly approaching the days when the Yuan becomes an integral part of the I.M.F.’ Special Drawing Rights. What will this unleash? Because the I.M.F. will not be able to dismiss it from this role thereafter, we do see more flexibility in the exchange rates of the Yuan. It is logical then that the People’s Bank of China then allow markets to establish the market exchange rate. We see that as continuing to fall to 7.00 to the dollar. No doubt this will produce howls of outrage from the U.S. if it happens brutally. But we suspect the PBoC. will make their adjustments behind the scenes so it happens gently.

What it does do for the Yuan is to establish it as one of the world’s main ‘hard’ currencies. The PBoC will then expand their program of Yuan globalization.

LBMA price setting:  $1,336.70 after Thursday 12th August’s $1,344.55.

The gold price in the euro was set at €1,198.40 down €7.80 from Thursday’s €1,206.20.

Ahead of the opening in New York the gold price stood at $1,338.85 and in the euro at €1,200.76 but some weak U.S. economic data saw the gold price move subsequently to over $1,350 again.  

Silver Today –The silver price closed in New York at $19.95 on Thursday down from $20.17 on Wednesday.  Ahead of New York’s opening the price was trading at $19.87. Following gold’s rise after the poor economic data, silver regained the $20.10 level

Price Drivers

Over the last day we have seen COMEX dominate London prices, ignoring those of Shanghai. The day before, saw Shanghai taking prices higher than New York and London following Shanghai. While the price differences are not that large and are influenced by exchange rates between the Yuan and the dollar, there is an ongoing pricing play between the two markets. With the Shanghai Gold Exchange/PBoC. Being the last resort counterparty we believe it does dominate prices. However, its prime objective in the exercise is not only to build a stable, orderly physical gold market and to have its prices dominate the world’s gold markets, it is to assist in the establishment of the Yuan as a leading ‘gold’ currency.

This is the way forward for the gold price. It makes little sense to have the world’s largest physical gold markets with 10,000 institutional participants and 8.3 million individuals so far bow to a mini-physical paper market in New York.

The most positive news today for gold and silver is the rapid approach of the “Gold Season” in September.

  • At this point the summer holidays for the developed world are coming to an end and the focus in the gold market is for jewelry producers to buy for the festive season at the end of the year.
  • In India, after falling to the lowest in seven years in the first half, demand for gold is certain to rise because of the excellent monsoon rains achieved this year since May continuing into September. This will boost rural demand during the festive season, starting in September.
  • In China, the expectation of a lower Yuan is broadcast in the Chinese media, encouraging growing demand in line with internal trends we mentioned in earlier newsletters from the Gold Forecaster.
  • In the last quarter of the year we expect U.S. demand for physical gold from investors in the shares of their Exchange Traded Funds to continue steadily.

     So far in 2016 investment demand for gold has overtaken the previous-ever high of 917 tonnes in 2009 [First half]  to reach 1,064 tonnes.

Gold ETFs – In New York on Wednesday there were no sales or purchases to or from the SPDR gold ETF (GLD) or the Gold Trust (IAU). This left their respective holdings at 972.618 tonnes and 221.24 tonnes.

Silver –Silver prices jumped back to over $20 after falling back this morning and will hold and move strongly when we see the strong move, either way, which we now expect from gold prices.

Julian D.W. Phillips | | StockBridge Management Alliance [Gold Storage geared to avoid its confiscation]

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