Gold and robust silver starting to bounce?

Gold Today –New York closed at $1,162.20 yesterday after closing at $1,159.00 on the 9th December. London opened again at $1,158.55 today.

Overall the dollar is weaker against global currencies today.

         The $: € was weaker at $1.0643: €1 from $1.0634: €1 yesterday.

         The Dollar index was weaker at 100.97 from 101.40 yesterday. 

         The Yen was stronger at 115.30: $1 from yesterday’s 115.76 against the dollar. 

         The Yuan was stronger at 6.9009: $1 from 6.9033: $1 yesterday. 

         The Pound Sterling was stronger at $1.2672: £1 from yesterday’s $1.2585: £1.

 Yuan Gold Fix

Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2016  12    13

      2016  12    12

      2016  12    9










$ equivalent 1oz @  $1: 6.9009

      $1: 6.9138

$1: 6.9033







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 prices held $27 higher levels than prices in New York. London opened at a higher discount to Shanghai of $30.  

Shanghai has set a pattern of late, of walking its own road, with the price of a gold gram in Yuan on a steady path, reflecting the value of the Yuan relative to the dollar. It has not seen speculators driving prices too far each way. The stability of the gold market in China is a pointer to the future.

Meanwhile, in New York or London dealers and the banks try to anticipate the next move and change their prices accordingly, so as not to be stuck with too much stock in a falling market or too little in a rising market. The sheer volumes and number of entities and investors in Shanghai appear to have overwhelmed such speculation. The high level of liquidity tends to lessen the impact of speculation on prices.

If buyers and seller in both London and New York had the option of selling or buying their gold in Shanghai, from London or New York, then there would be one global price. Until then HSBC makes the differential. But while it is to China’s advantage to pick up stock at a discount in London the price differential will persist, steadily draining London’s liquidity.

The purpose of the Capital Controls now imposed in China is to slow the depreciation of the Yuan down. The news from China that its economy is growing steadily should have assisted the PBoC in this quest, but it is unlikely to do so.

We believe we are entering a time when Capital Controls will be imposed in many countries [including the U.S.] with the purpose of stabilizing their currencies. With Trump determined to rattle the global cage, as well as inside the U.S. such controls will have a greater impact on the value of currencies than the current ‘currency wars’. The currency world in 2017 and beyond will see the major blocs playing every man for himself.

LBMA price setting:  The LBMA gold price setting was at $1,157.35 this morning against yesterday’s $1,154.40. 

The gold price in the euro was set higher at €1,090.40 after yesterday’s €1,088.03.

Ahead of the opening of New York the gold price was trading at $1,158.70 and in the euro at €1,092.29.  At the same time, the silver price was trading at $17.04.

Silver Today –Silver closed at $17.07 at New York’s close yesterday from $16.85 on the 9th December. 

 Price Drivers

The fall in the gold price halted yesterday as the volume of sales from U.S. based gold ETFs became small. We have not seen a rally since the gold price broke down through $1,210 so one is overdue. But we expect to see no change in trend until the ‘honeymoon’ with Trump is over. That could be early in his Presidency as he is alienating his own party as well as many nations across the world. Until then, while we are seeing a bear market in bonds, a bear market in equities is yet to begin. When it comes, not a few eyes will be watering.

2017 – If we take a list of potential problems facing the world in 2017, which list is extensive, we see the most relevant to gold being currency volatility as well as any Capital Controls that will appear. In a de-globalizing world the ability of gold to remain immune to national problems will become increasingly attractive. We do not subscribe to the idea that gold has seen its best days, far from it. After the current euphoria over Trump has died down and reality has set in, gold will resume its upward trend. The art will be to get back in close to its ‘floor’. We will be writing on this extensively in the Gold Forecaster and suggest you look at where a system of preventing gold’s confiscation is in place.

India – Meanwhile in India, the currency debacle continues, as replacements to the now illegal tender remain insufficient. Just how badly the economy has been damaged remains to be seen. If the government fails in the implementation of destroying the ‘black money’ financial system in the country just how will they maintain such a system?

Of course ‘official imports of gold will plummet as they are replaced by smuggled imports. Until the cash crisis is resolved there is no cash with which to finance marriages or other reasons behind gold purchases. But you can be sure that the inventive Indians will find a way!

Gold ETFs – Yesterday, there were sales of 1.186 tonnes from the SPDR gold ETF and sale 0f 0.6 of a tonne from the Gold Trust holdings, leaving their respective holdings at 856.259 tonnes and 197.46tonnes. These sales continue to pull gold prices down.

Since January 4th this year, 252.74 tonnes of gold has been added to the SPDR gold ETF and to the Gold Trust. 

  • At the end of November, total holdings in physically-backed gold exchange-traded products (ETPs) stood at 2,240.5 (72.0 moz), down 120.7t from a month earlier. In value terms, total holdings stood at US$84.9bn, 12% lower than at the end of October.
  • Holdings succumbed to selling pressure across all geographical regions. North American and European funds dropped 87.3t and 23.4t to 1,252.0t and 872.1t, respectively.

Silver –Silver is showing a robust nature of late so we would expect its price moves to try to hold the $17 level for the present.  

Julian D.W. Phillips | | StockBridge Management Alliance   


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