Gold steadying despite massive ETF sales

Gold TodayNew York closed at $1,218.20 yesterday after the previous close of $1,227.70 London opened at $1,226.00 but then rose in the morning in line with Shanghai prices.

    • The $: € was a weaker at $1.0773: €1 from $1.0737: €1 yesterday.
    • The Dollar index was a weaker at 99.72 from 100.03 yesterday.
    • The Yen was almost unchanged at 107.91: $1 from yesterday’s 107.94 against the dollar.
    • The Yuan was weaker at 6.8556: $1 from 6.8450: $1 yesterday.


  • The Pound Sterling was weaker at $1.2493: £1 from yesterday’s $1.2522: £1.


Yuan Gold Fix

Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
     2016  11    15      

     2016  11    14

     2016  11    11










$ equivalent 1 oz @ $1: 6.8556

$1: 6.8450

$1: 6.8111







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. [Please note that the 0.5% difference in price can be accounted for by the higher quality of Shanghai’s gold on which their gold price is based over London’s ‘good delivery’ standard of 0.995.]

Shanghai, as you can see above, feels that the fall has gone too far and lifted it $17 from New York’s close. London rose  in its morning to almost Shanghai levels rather than stayed low alongside New York. In the last day it is clear that pricing power today, has gone to Shanghai and away from New York. The large physical sales in New York did send the gold price down $120 in the last week but yesterday’s ETF sales [as you see below], which should have continued to push prices down did not and prices rose in the face of yesterday’s nearly 11 tonne sales. Yes, it is a time for a correction, but it is significant that Shanghai had sufficient control to set it in motion!

The dollar is seeing its run stronger weakening. It has been so strong that it was time for a correction before moving again. This is not to say it is going stronger or weaker as markets continue to move prices brutally. We at Gold Forecaster do expect it to be restrained by the U.S. Treasury as 100 on the dollar index is a step too far for the U.S. economy.

LBMA price setting:  The LBMA gold price setting was at $1,228.90 against yesterday’s $1,222.60. The gold price in the euro was set higher at €1,140.88 against yesterday’s €1,134.72.

Ahead of the opening of New York the gold price was trading at $1,226.00 and in the euro at €1,138.14.  At the same time, the silver price was trading at $16.98.

Silver Today –Silver rose to $16.85 at New York’s close yesterday

Price Drivers

When a market is as exuberant as we see currency, gold and silver markets at present, prices always fall too far or rise too high. We have seen that beautifully demonstrated in the last week. With China now taking gold higher we are looking to see just who follows who in the global gold markets. While a market then settles down, volatility rules prices. We expect that to continue, both ways.

India imposes draconian money controls. Finance Minster Arun Jaitley informed India’s business community that it should prepare for cashless economy using checks, cards, payment gateways or digital transactions.

In the developed world such a move would be considered extreme, particularly when imposed in the brutal fashion it has been in India. But in India, a cash society, such moves [making Rs.500 and Rs.1,000 notes not valid tender anymore] alongside inadequate preparations for their exchange has made the government across the country deeply unpopular.

We know of only one time when the government and financial system attacked its competition in this way. As an extension of this attack government bureaucrats are calling to account gold jewelers across the country in an attempt to curtail illegal gold trading as we mentioned yesterday. Rumors of a ban on gold imports into India are spreading. Overall, this is an attempt by the government to impose a developed world monetary system on the country. What next? [We will discuss this in depth in the next issue of Gold Forecaster for subscribers. It has significant ramifications for both institutions and individuals outside of government!]

Gold ETFs – There were sales of 5.634 tonnes of gold from the SPDR gold ETF and sales of 5.61 tonnes from the Gold Trust yesterday, leaving their respective holdings at 928.929 tonnes and 212.67tonnes.

These sales of gold from the SPDR gold ETF and continuing heavy sales from the Gold Trust are ongoing sellers who traded the gold price in the short to medium term. Funds that actively trade several times during the year are the main players moving gold in and out of these gold ETFs. Soros sold before the election, Drukenmiller just after and sellers since then are a similar crowd who could now have sold at the bottom? Paulson continues to hold his position.

They have now sold over 55 tonnes in the last week. But as you have no doubt noted, their impact on the gold price is lessening as gold is starting to hold lower price levels, despite the huge size of these daily sales. The amounts sold from the Gold Trust are particularly large in relative terms.

Inflows into SPDR gold ETF and Gold Trust have risen to a three-year high in the third quarter from January 4th this year, to close to 400 tonnes. Currently, this figure has now dropped back to 340.59 tonnes. We do expect these holdings to rise strongly as future intended inflation prospects will cause real interest rates to remain negative. Gold is far more popular now, as a hedge against inflation, which, when Trump solidifies his plans, will start to run strongly.

Silver – Repeat: Silver dropped heavily after retaining a stable level above $18 and then fell back to just below $17.00. We expect silver to continue to track gold perhaps falling more before gathering strength for a rebound.

Julian D.W. Phillips | | StockBridge Management Alliance

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