Gold price consolidating despite heavy SPDR gold ETF sales

Gold TodayNew York closed at $1,267.20 yesterday after the previous close of $1,266.10 London opened at $1,265.40.

    • The $: € was slightly weaker at $1.0890: €1 from $1.0882: €1 Friday.
    • The Dollar index was stronger at 98.61 from 98.58 Friday.
    • The Yen was slightly weaker at 103.89: $1 from Friday against the dollar.
    • The Yuan was weaker at 6.7735: $1 from 6.7638: $1 Friday.


  • The Pound Sterling was barely changed at $1.2228: £1 from Friday’s $1.2226 £1.


Yuan Gold Fix

Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
     2016  10  24

     2016  10  21







Dollar equivalent

1 oz @ $1: 6.7735

$1: 6.7638





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

Demand in China is strong, as expressed in Yuan prices in Shanghai. This will pull gold into China from London. Only the People’s Bank of China buys ‘London Good Delivery’ [0.995 quality.]. Switzerland re-refines London’s gold into higher quality [0.9999], half a percent better quality. We expect a resumption of the flow of the highest quality gold into the Far East, that’s both China and India.

We have long forecast a weak Yuan and an outflow of Yuan to serve the world as another Global Reserve Currency, which is now happening. Outbound transfers of Chinese Yuan “surged to a record in September” according to official Beijing data showing a net outflow worth almost $45 billion. Such outflows have a considerable way to go before the Renminbi can serve in this role, but we can’t see anything stopping this process.  

LBMA price setting:  The LBMA gold price setting was at $1,267.00 against Friday’s $1,263.95. The gold price in the euro was set higher at €1,163.24 against yesterday’s €1,160.65.

Ahead of the opening of New York the gold price was trading at $1,265.10 and in the euro at €1,161.49.  At the same time, the silver price was trading at $17.64.

Silver Today –The silver price rose to $17.54 at New York’s close yesterday from $17.53, Monday.  

Price Drivers

With more and more investors believing that a rate hike in December is a near certainty, it is likely to be one of only two that will happen from now until the end of 2017. It was thought that there could be two or three in 2017, but those thoughts are fading as the U.S. and global economies are not likely to do so well in 2017 and look to be facing recessions.

Indeed, the rising protectionism that we forecast earlier this year, is gaining traction as the Belgians are rejecting the TTIP deal with the U.S., Germany is calling for more political power to halt Chinese takeovers of European companies.

We have known that the U.S. is not happy to allow Chinese takeovers of important companies there.  We forecast this trend towards protectionism will grow.

The seepage of power and wealth to China has gone on for a many years now and will continue until western costs of production are the same as Asian costs of production. But as of now the issue is gathering momentum in political circles in the developed world.

Such protectionism will impact foreign exchange rates and make 2017 a volatile year in exchange rates. While the dollar is strengthening at the moment, we are certain the U.S. will not allow a strong dollar  to undermine the U.S. economy and will act to protect the economy and prevent the U.S. dollar rising against other currencies such as sterling, the euro and the Yuan. This will provide an excellent climate for rising gold and silver prices.

Let’s be clear on the ‘big’ picture here. The Chinese economy is achieving its aim of a consumption-led economy from an export-led one, as it moves to the globe’s No. 1 economy at great cost in credit terms. We see the world becoming increasingly divided. Gold will act like oil to prevent friction in such a world.

Gold ETFs – There were sales of 16.611 tonnes of gold from the SPDR gold ETF and no change in the Gold Trust, Friday, leaving their respective holdings at 953.564 tonnes and 228.16 tonnes.  

These sales were huge for one day. It looks as though this was a sale with the purpose of forcing the gold price lower! So much in one day is not the way a seller seeks to maximize the proceeds of a sale. It would usually be stretched out over some time. This week will show just how strong an influence on the gold price such ‘bear-raids’ are. If gold does not fall in the face of such sales, it has become robust and will react strongly to upside pressure.

Silver – Silver prices are expected to continue nervous as gold consolidates.

Julian D.W. Phillips | | StockBridge Management Alliance

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