Gold Today –New York closed at $1,254.60 yesterday after closing at $1,262.70 Wednesday. London opened at $1,255.70 today. 

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

–         The $: € was slightly weaker at $1.1174 after yesterday’s $1.1164: €1.

–         The Dollar index was slightly stronger at 97.34 after yesterday’s 97.28. 

–         The Yen was weaker at 111.31 after yesterday’s 109.65:$1. 

–         The Yuan was weaker at 6.8152 after yesterday’s 6.8019: $1. 

–         The Pound Sterling was stronger at $1.2774 after yesterday’s $1.2696: £1.

Yuan Gold Fix

Trade Date	Contract	Benchmark Price AM 1 gm	Benchmark Price PM 1 gm
2017    6    16      2017    6    15                    2017    6    14	SHAU SHAU SHAU	/ 278.41 279.24	Trading at 277.50 277.37 279.07
$ equivalent 1oz at 0.995 fineness @    $1: 6.8152        $1: 6.8019        $1: 6.7976		/ $1,268.12 $1,272.71	Trading at $1,261.47 $1,263.35 $1,271.93

Please note that the Shanghai Fixes are for 1 gm of gold. From the Middle East 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.]

 While London and New York are holding yesterday’s [after the Fed] levels Shanghai has pulled back but not so far and we are now seeing New York $6 lower than Shanghai and London also $6 lower than Shanghai today. This is basically a repeat of yesterday’s differentials.

Certainly Shanghai did not pull gold back as much as the other centers on the back of the Fed’s rate rise and statement. It does appear that this move in U.S. rates is now factored in.

Silver Today –Silver closed at $16.73 yesterday after $16.87 at New York’s close Wednesday.

LBMA price setting:  The LBMA gold price was set today at $1,256.60 from yesterday’s $1,260.25.  The gold price in the euro was set at €1,124.42 after yesterday’s €1,128.75.

Ahead of the opening of New York the gold price was trading at $1,255.00 and in the euro at €1,124.25. At the same time, the silver price was trading at $16.78. 

Price Drivers

The Fed

Gold pulled back after the Fed’s announcement yesterday, but that appears to have been factored into the gold price now. What influences will now be brought to bear on the gold price? First and foremost the trend will dominate, alongside the path forward for the dollar. Shanghai will more than likely increasingly dominate the gold price.

With U.S. equity market this high, we expect to see them become increasingly vulnerable to falls. This may well lead to sellers in these markets turning to gold for wealth preservation.

China

The first quarter of 2017 saw a rise of 60.2% in demand for physical gold bars compared to a 22.4% growth for the year-earlier period.

Recovering from a 14.4% decline during the same period last year, demand for gold jewelry rose just 1.4% which is to be expected when demand for gold bars and bullion is high. This year, total Chinese gold imports through Hong Kong are set to be higher than 1,000 tonnes, compared to 771 tonnes imported in 2016. Add that to the imports from Switzerland and other countries together with local production of around 450 tonnes, then gold accumulation in China must be very high although below record levels.

India

May’s imports of gold to India jumped from last year’s 39.76 tonnes to 123.17 tonnes this year as gold was imported ahead of the announcement of the new GST rates. These were perhaps lower than expected, so will not affect demand. What will affect demand is the seasonal period that has started as crops are planted for the monsoon season. This has started off very well as rains are good and heavy. The crops will be harvested in July and August just before the gold season begins around September. With such a good monsoon already we expect high demand for gold from then on.  In the past 70% of gold demand came from the agricultural sector. Since then a great deal of urbanization has happened reducing the seasonal influence, but not the religious influence as reflected in demand just ahead of festivals. We see imports of gold into India, including smuggled gold to reach record levels this year.

Gold ETFs – Yesterday, saw sales from the SPDR gold ETF 0f 1.184 tonnes but no change in the holdings of the Gold Trust. Their holdings are now at 853.684 tonnes and, at 207.06 tonnes respectively.

 

Since January 6th 2017 48.29 tonnes have been added to the SPDR gold ETF and the Gold Trust.

 Julian D.W. Phillips 

 GoldForecaster.com | StockBridge Management Alliance