Gold Today –New York closed at $1,258.10 yesterday after the previous close of $1,255.20.  London opened at $1,255.00.

• The $: € was weaker at $1.1016: €1 from $1.1008: €1 yesterday.
• The Dollar index was weaker at 97.86 from 98.01 yesterday.
• The Yen was weaker at 104.26: $1 from 103.98: $1 yesterday against the dollar.
• The Yuan was weaker at 6.7246: $1 from 6.7239: $1 yesterday.

 

• The Pound Sterling was stronger at $1.2210: £1 from yesterday’s $1.2158: £1.

 

Yuan Gold Fix

Trade Date	Contract	Benchmark Price AM 1 gm	Benchmark Price PM 1 gm
2016  10  14      2016  10  13	SHAU SHAU	272.91 272.85	272.68 /
Dollar equivalent 1 oz @ $1: 6.7246 $1: 6.7239		$1262.30 $1,262.15	$1,261.23 /

Please note that the Shanghai Fixes are for 1 gm of gold. From the Middle East eastward metric measurements are used against 0.9999 quality gold.

Shanghai is holding the gold price in a very narrow trading band above $1,260. New York is moving up to that level but London pulled the gold price back slightly to open at $1,255. But even in London the trading range is narrow now a sign, usually that we are on the brink of a strong move either way.It is now clear to most observers that the People’s Bank of China wants the Yuan lower and is encouraging a ‘controlled’ devaluation over time. They are keen not to have a howling condemnation of a lower Yuan so are moving slowly, although compared to efforts by the E.U. and Japan to drive their currencies lower their actions are extremely restrained.

Apart from the trade benefits of a lower Yuan the gold price in the Yuan is set to benefit which is why the government has encouraged the population to buy gold. After all, if it hadf fallen heavily the gold investors would not be happy. The aim of having a vastly greater number of Yuan in international markets is certainly the government’s objective. Its role as a global reserve currency will then allow it to eventually challenge the dollar.

LBMA price setting:  The LBMA gold price setting was at $1,256.15 against yesterday’s $1,258.00. The gold price in the euro was set higher at €1,140.04 against yesterday’s €1,141.46.

Ahead of the opening of New York the gold price was trading at $1,254.00 and in the euro at €1,138.55.  At the same time, the silver price was trading again at $17.49.

Silver Today –The silver price fell to $17.50 at New York’s close yesterday from $17.54, Tuesday.  

Price Drivers

A major benefit of the gold price stabilizing at these lower levels is that both the Chinese and the Indian gold community is now seeing current price levels as being attractive and are now entering the market as buyers. With Diwali falling on October 30th this year demand is picking up fast in India with discounts dropping as demand arrives. After a good monsoon, demand for gold is strong as the ‘auspicious’ time to buy gold has arrived.

We believe that smugglers are leading the suppliers as they can still offer deep discounts on their gold. The ‘legal’ suppliers have to compete as best they can so when discounts drop as we now see, then we know demand is high enough to absorb most supplies. Importers will be placing their orders through London shortly.

Chinese demand is returning to the market place too. At some point this demand will reflect in gold prices.

Gold ETFs – There were purchases of 2.67 tonnes into the SPDR gold ETF. There was no change in the holdings of the Gold Trust, leaving both their respective holdings at 961.572 tonnes and 227.23 tonnes.  While this was a large set of purchases in itself it was not enough to push the gold price higher. It does show that U.S. investment demand remains positive and may well be serving to stabilize prices at current levels.

Since January 4th this year, the holdings of these two gold ETFs have risen by 387.823 tonnes.

Silver – Silver prices are marking time alongside gold waiting for the breakout one way or the other.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance