Indian and Chinese gold demand higher than major analysts report

Gold Today –New York closed at $1,189.10 on the 26th January after closing at $1,200.10 on the 25th January. London opened at $1,184.00 today.

 Overall the dollar was stronger against global currencies early today. Before London’s opening:

         The $: € was stronger at $1.0696: €1 from $1.0732: €1 yesterday.

         The Dollar index was stronger at 100.50 from 100.11 yesterday. 

         The Yen was weaker at 114.99:$1 from yesterday’s 113.78 against the dollar. 

         The Yuan was weaker at 6.8772: $1, from 6.8766: $1, yesterday. 

         The Pound Sterling was weaker at $1.2563: £1 from yesterday’s $1.2635: £1.

 Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    1    27

     2017    1    25

      2017    1    24










$ equivalent 1oz @  $1: 6.8772

      $1: 6.8755

$1: 6.8766







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 was closed today until next Friday for the Lunar New Year celebrations. Yesterday it traded between 268 and 266.80 but the Fixes have not been released today. This equates to $1,212.38 and dropping to $1,206.95 Which was in line with London then, before New York took it down further as Options were closed.

The dollar was stronger across the board, but only slightly against the Yuan.

Shanghai has pricing power over gold

Looking back over the last month, since Shanghai cut the size of contract to a maximum of 500 Kgs, making speculation very expensive, there is no doubt that Shanghai controlled global gold prices during that time. We can see no reason why this should not continue in the future, after Chinese demand from the global gold market returns next week.

LBMA price setting:  The LBMA gold price was set today at $1,184.20 down from yesterday’s $1,191.55.  

The gold price in the euro was set lower at €1,107.45 after yesterday’s €1,111.21.

Ahead of the opening of New York the gold price was trading at $1,185.45 and in the euro at €1,108.62.  At the same time, the silver price was trading at $16.77. 

Silver Today –Silver closed at $16.80 at New York’s close yesterday against $16.99 on the 25th January. 

Price Drivers

Yesterday in New York there were no further sales of gold from the U.S. based gold ETFs, but as we forecast, the price fell as options were closed out. We do not expect heavy ongoing sales in the U.S. or London, because the time to sell was yesterday and the day before, in the very short term.  This may open the door to speculators going short for the next week only.

World Gold Demand/Supply figures not complete

We are getting the impression that developed world gold markets are of the opinion that there is surplus of gold and that demand will weaken soon. We do respect the leading analytical agencies which are extremely competent.

However, their arms are tied behind their backs because they only look at retail remand in China and cannot gather enough accurate information on smuggled gold in India, which we believe is far larger than they estimate and growing rapidly. Indians fear disclosing gold purchases to government via banks because they don’t trust government or banks but in particular the bureaucrats that administer government policies. Hence Indian ‘official’ imports cannot be an accurate measure of Indian demand.

Chinese gold demand that ignores gold in the banking system is likewise an inadequate measure.

Indian Gold inaccessible

The WGC provided numbers on gold held in India at 24,000 tonnes excluding Temple owned gold, which we know is well over 2,000 tonnes. This gives us a sense of proportion on Indian respect for gold remaining unwilling to give the government either control of it or access to it. Global Central Bank held gold is over 34,000 tonnes. While government and the Indian banking system would love to command these assets, we can’t see any government surviving after any attempt to do so. The debacle over the 86% of cash in the country causing an economic crunch of greater proportions than any agency will admit, in itself, may cost the government its position.

Current Global Gold Demand

We spoke to our Swiss friends in the industry and they have confirmed demand has never been so high with refineries running 24 hour shift six days a week in December and now.  

They are exporting primarily to China and Indian buyers at full pelt.

With prices pulling back now, when the Chinese do return we see them jumping in to get these prices.

Gold ETFs – Yesterday, in New York, there were no sales or purchases of gold from or into the SPDR gold ETF or the Gold Trust, leaving their respective holdings at 799.070 tonnes and 198.75 tonnes. 

Since January 4th 2016, 196.94tonnes of gold has been added to the SPDR gold ETF and to the Gold Trust. 

Julian D.W. Phillips: | | StockBridge Management Alliance 

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