Remarkable gold price performer Shanghai key price driver

Gold Today –New York closed at $1,181.20 on the 5rd January after closing at $1,163.50 on the 3rd January. London opened again at $1,176.15 today.

 Overall the dollar is weaker against global currencies today. Before London’s opening:

         The $: € was weaker at $1.0596 €1 from $1.0503: €1 yesterday.

         The Dollar index was weaker at 101.61 from 102.36 yesterday. 

         The Yen was stronger at 116.08: $1 from yesterday’s 116.66 against the dollar. 

         The Yuan was stronger at 6.9211: $1, from 6.8874: $1, yesterday. 

         The Pound Sterling was stronger at $1.2386: £1 from yesterday’s $1.2319: £1.

 Yuan Gold Fix

Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    1    6

     2016    1    5

      2016  12    4










$ equivalent 1oz @  $1: 6.9211

      $1: 6.8874

$1: 6.9321







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.]

 Yesterday the People’s Bank of China stepped into the foreign exchange market to try to restrain the fall in the Yuan and managed to pull the Yuan higher with it reaching 6.86 at one point. But as you can see this has been short-lived as the currency sank back to 6.9211 today, despite a weaker dollar. The recent fall in the Yuan has been due to a strong dollar and not a weak Yuan. But China is conscious of the Trumped up charge that it is a ‘currency manipulator’. The evidence is otherwise with the Yen, euro and sterling providing more evidence of such than China.

But what is of importance to gold investors is the continuing steady but solid small gains being shown in the gold price in the Yuan. It is still within the 264 a gram level, where it has been throughout this week. Translating those prices into the dollar shows that the stronger Yuan made it look as though the gold price had jumped significantly in Shanghai, but it was simply a reflection of a stronger Yuan against the dollar. [See yesterday’s commentary on currency and gold price moves]  

Meanwhile the New York prices continue to rise faster than Yuan prices lowering the difference to $10 and in London the difference is now at $15 a change from London’s difference being smaller than New York’s. It is clear that Shanghai’s gold prices are leading global gold markets now.

LBMA price setting:  The LBMA gold price setting was at $1,178.00 this morning against yesterday’s $1,173.05. 

The gold price in the euro was set higher at €1,113.16 after yesterday’s €1,116.98.

Ahead of the opening of New York the gold price was trading at $1,176.70 and in the euro at €1,111.98.  At the same time, the silver price was trading at $16.45. 

Silver Today –Silver closed at $16.62 at New York’s close yesterday from $16.43 on the 4th January. 

 Price Drivers

Shanghai ‘s price performance is remarkable. We have been waiting and watching to see if that gold market would assert itself over London and New York. In the last week, the first week of trading in 2017, we now have clear evidence that it is doing so.

Until now we received constant reports that Shanghai was at a ‘premium’ to London and New York. This implies that Shanghai was the market out of sync with those markets. It seemed as if Shanghai did not have stock as it was dependent on the others for supply and would come into line once that problem was solved. It seemed as if Shanghai prices were peculiar to that market. This left COMEX prices heavily influencing London while its ‘paper’ market, COMEX dominated prices. The last week has changed that picture!

Shanghai gold prices have moved higher steadily and driven by currency moves, London and New York have been more volatile. But London and New York have risen close to levels of Shanghai, not Shanghai prices falling back. With Chinese prices holding so steady we see gold prices reflecting currency moves like a mirror.

This promises a less volatile [actual] gold price in 2017 more and more reflecting global physical demand and supply.

It suggests that investors and traders, in the future examine currency prospects more than gold demand and supply, to see where gold prices in different currencies are going.  

Gold ETFs – Yesterday in New York, there were sales of 0.28 of a tonne from the SPDR gold ETF and there was a purchase of 0.79 of a tonnes into the holdings of the Gold Trust, leaving their respective holdings at 813.591 tonnes and 197.40 tonnes. 

Yesterday saw net purchases into these two gold ETFs of 0.51 of a tonne, the second day of net purchases into gold ETFs!

Julian D.W. Phillips | | StockBridge Management Alliance 

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