Next major price move in gold and silver critical

Gold Today –New York closed yesterday at $1,225.30. London opened at $1,224.00 today. 

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

         The $: € was almost unchanged at $1.1353 after yesterday’s $1.1356: €1.

         The Dollar index was slightly weaker at 96.22 after yesterday’s 96.25

         The Yen was stronger at 113.33 after yesterday’s 113.51:$1. 

         The Yuan was weaker at 6.8037 after yesterday’s 6.7988: $1. 

         The Pound Sterling was stronger at $1.2935 after yesterday’s $1.2908: £1.

Yuan Gold Fix
Trade Date     Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    7    6

     2017    7    5            

     2017    7    4







Trading at 270.95



$ equivalent 1oz at 0.995 fineness

@    $1: 6.8037

       $1: 6.7988

       $1: 6.8025     




Trading at $1,233.66



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.]

 Shanghai is steady at higher levels than on Tuesday. New York traded at $5 lower than Shanghai following Shanghai’s close yesterday. Today London opened $9 lower than Shanghai. Today remains a critical day for the gold price in all three global centers as the direction forward is still to be established.

The gold price can go either way right now.

Silver Today –Silver closed at $16.03 yesterday after $16.08 at New York’s close Wednesday. The silver price has formed a double bottom, if the silver price moves higher next.

LBMA price setting:  The LBMA gold price was set today at $1,224.30 from yesterday’s $1,221.90.  The gold price in the euro was set at €1,075.13 after yesterday’s €1.079.23.

Ahead of the opening of New York the gold price was trading at $1,225.00 and in the euro at €1,075.79. At the same time, the silver price was trading at $16.00. 

Price Drivers

Both the gold and silver prices are at critical points on the Technical scene. It is a difficult day for Technicians, but for gold investors even more so as they also have to take into account the fundamentals.

The Fed Minutes gave a less certain picture than was interpreted by the media from the statement by Janet Yellen. The Fed is worried that inflation is falling, not rising and it is now clear that if we do see a rate hike, we are unlikely to see a start to the tapering of the Fed’s Balance Sheet. But we do expect a Balance Sheet reduction from September at a very slow pace, so the prospect of a rate hike this year is falling away if the data pattern continues as it is now.

The fear of a disruption of financial markets across the world is high.  If there is such instability, we would fully expect Fed policy to be changed in the face of it and quickly. This tells us that uncertainty remains at high levels, a good environment for gold and silver prices.

Overall, the prospects for the gold price remain positive longer term. Short-term they could go either way. We emphasize that the next price moves in the short term will affect the medium term direction for gold and silver prices.

Will North Korea become a major point of division between China and the U.S. Bear in mind that in 1952 when the Korean war raged, China made it clear by their support of North Korea that North Korea is one of its “vital interests” and it is more than likely to oppose the U.S. and South Korea if more than a surgical strike were carried out. The potential for another Korean war is rising. This would be gold positive.

The government nationalizations of two of their banks, so far demonstrates to us that banks are sacrosanct in the eyes of all governments, the world over. It is unlikely that major banks will ever be allowed to fail in the future and that its depositors will continue to simply be unsecured creditors, a concept that the public has great difficulty in taking on board.  It is similar with a nation’s currency. We look at Venezuela and the past scene in Zimbabwe where their currencies are rubbish outside their borders, but the only choice inside their border. For national currencies to retain their credibility outside their borders the gold content of national reserves is of rising importance. It is the international assessment of currencies that count, which is why gold is so important to all governments and why it is gently making its way back into the global monetary system.  

In Zimbabwe the currency was so debauched that at one point they banknotes has “use by” dates on them. It cost Z$70,000 to go from Harare suburb to the center of town by bus. Zimbabweans needed a bag to carry their bus fare in.

Hence the real value of gold, which is unaffected by any government’s currency policies. Gold measures those currencies value.

Gold ETFs

Yesterday another 5.62 tonnes of gold was sold from the SPDR gold ETF and 0.04 of a tonne was sold from the Gold Trust. The SPDR gold ETF and Gold Trust holdings are at 840.669 tonnes and at 210.31 tonnes respectively. Since January 6th 2017 38.565 tonnes have been added to the SPDR gold ETF and the Gold Trust.

 Julian D.W. Phillips | StockBridge Management Alliance 



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