gold ETFs

Gold Pricing Battle Playing Out. Silver Benefiting

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My latest article on sharpspixley.com opens as below.  It looks at what is happening in the gold bull vs gold bear battle and the recent downturn in the gold:silver ratio which is beginning to see silver playing catch-up after a disappointing (relative to gold) performance to date.

The recent pattern in the gold price is making the yellow metals’ short term future somewhat unpredictable.  Was it ever thus?  There is perhaps, though, more of an equal battle between those pushing gold prices higher, and those looking to take it down, than there has been since the heady first three quarters of 2011 when the gold bulls were very much in the ascendancy, and the subsequent four years with the bears dominant.

This year has seen a significant change in sentiment towards gold, with the price up around 17% year to date.  Silver is up around 14% as well, but has only recently started to express its upwards volatility vis-a-vis gold and is still having to play catch-up, with the Gold:Silver ratio at last beginning to come down from its highest level in nearly eight years when it last settled above 80 at the heart of the 2008 financial crisis….

To read full article click here

Note:  The gold price and silver prices were driven down overnight last night after something of a surge put down to the Brussels bombings.  Whether this is indicative of a significant correction in precious metals prices, which many analysts think likely, or the big gold and silver short position holders manipulating the futures markets to protect themselves against what could be very large losses should the precious metals continue to surge, is as yet uncertain.

Negative Interest Rates Boost Gold Demand Overseas  – The Holmes SWOT

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Frank Holme of U.S. Global Investors‘ weekly roundup of perceived Strengths, Weaknesses, Opportunities and Threats for Precious Metals

Strengths

  • The best performing precious metal for last week was silver, up 2.87 percent. Investors own the most silver in exchange-traded products in seven months, boosting holdings from a three-year low, according to ZeroHedge. This rebound comes as hedge funds and other money managers hold a near-record bet on further price gains.
  • Physical gold ETF holdings have increased by over 270 tonnes since reaching their cycle-low in early January, reports TD Securities, coinciding with an 18 percent rally in the gold price. In contrast, only three tons of gold have been collected so far in India’s newly announced deposit plan. Macquarie raised its 2016 gold forecast for the precious metal by 4.8 percent, while Morgan Stanley announced its gold price outlook for the year up 8 percent to $1,173 per ounce.
  • Calico Resources Corp. and Paramount Gold Nevada Corp. announced this week that Paramount has agreed to acquire all of the issued and outstanding common shares of Calico. Particulars of the transaction show that holders of Calico Shares will be entitled to 0.07 of a share of common stock of Paramount, in exchange for each Calico Share held. This represents an implied offer premium of 49.2 percent per share.

Weaknesses

  • The worst performing precious metal for the week was gold, still up 0.34 percent. Gold consolidation is underway says UBS, adding that this should be healthy for the market. In its Global Precious Metals Comment this week, the group points out that pullbacks in gold so far this year have been relatively shallow and short-lived, not really offering investors many opportunities to enter at better levels.
  • While the Indian jewelry trade continues its stir for withdrawal of the 1 percent excise duty announced in the Union Budget, the finance ministry does not indicate a compromise, reports the Business Standard. The strike entered its seventeenth day on Thursday. One ministry official said, “There is no question of a rollback.”
  • B2Gold Corp. announced this week its approval for Gold Prepaid Sales Financing Arrangement, or prepaid sales, of up to $120 million. As stated in the company’s release, the prepaid sales (in the form of metal sales forward contracts) allow B2Gold to deliver pre-determined volumes of gold on agreed future delivery dates in exchange for upfront cash pre-payment. These financing arrangements will help fully fund the Fekola Mine Construction.

Opportunities

  • CLSA’s Christopher Wood believes that the European Central Bank’s meeting last week reinforces the fact that central banks globally are addicted to unconventional monetary policies, reports Barron’s. Prior to the Bank of Japan meeting this week, Wood said that pension funds should have 70 percent exposure to the precious metal. Wood’s logic says that as we adjust for rising income, gold could peak again at $4,212 an ounce in an ultimate bull market.
  • Bloomberg reports that in Japan, negative interest rates are boosting gold demand (according to the nation’s biggest bullion retailer). The same is true in Germany, where reinsurer Munich Re has boosted its gold and cash reserves in the face of the negative interest rates imposed by the ECB, reports Reuters. Last week the ECB cut its main interest rate to zero and dropped the rate on its deposit facility to -0.4 percent from -0.3 percent.
  • Roxgold Inc. announced results from its latest drilling project this week from the QV1 structure at the Bagassi South regional exploration target, 1.8 kilometers to the south of the 55 zone. “Results from this program further confirm the potential at QV1,” stated John Dorward, President and CEO of Roxgold.  These results make a stronger case for owning Roxgold and likely increased the prospect of Roxgold as a significant take out candidate.

Threats

  • The CSFB “Fear Indicator” (specifically designed to measure investor sentiment, and represented by the index prices zero-premium collars that expire in three months) has never been higher, writes ZeroHedge. This could indicate that institutional investors are not believers in the equity rally and that there is more demand for put protection, continues the article, a sign of fear in the marketplace.
  • Total business inventories have ballooned to crisis levels, according to a report from Macro Strategy Partnership. This can be seen in the chart below which shows the inventory-to-sales ratio. Inventories are up another 1.8 percent year-over-year to $1.81 trillion, and are up 18.5 percent from the prior peak in August 2008 while sales are only up 5.8 percent over the period.
  • Barclays thinks that the rally in commodities is overdone, and although economic data has improved, it is not enough to support current prices. With a fragile global economy still in place, the group believes that a turning point for commodities is still some way away.

First significant sale from GLD for several weeks. Price falters.

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Gold Today –Gold closed in New York at $1,261.40 down from $1,268.00 on Tuesday. In Asia this morning, it moved lower to $1,257 at one point and then in London until the LBMA price setting was set at $1,258.25 down from yesterday’s $1,274.10. The dollar index is slightly higher at 97.37 down from 97.17 on Tuesday.

The dollar is up against the euro at $1.0963 from $1.1009 on Tuesday. The gold price in the euro was set at €1,143.83 down from €1,157.33.

Ahead of New York’s opening, the gold price was trading at $1,254.1 and in the euro at €1,143.78.  

Silver Today –The silver price closed in New York at $15.36 down 29 cents.  Ahead of New York’s opening the silver price stood at $15.30.

Price Drivers

E.U. With Draghi of the E.C.B. shortly to announce more stimulus measures, skeptics are having their day. After all this time and after so much monetary stimuli has been injected into the Eurozone the results have been disappointing, so will larger negative interest rates and more QE do any better? What have been the results to date? Even after the central bank pumped about €720 billion into the region, manufacturing dropped to its lowest level since 2013, the inflation rate turned negative, and consumer confidence worsened.

With debt to GDP levels rising, the warnings from the BIS & IMF about the storms coming are on the brink of coming to pass.

Gold ETFs There were sales of 2.378 tonnes of gold from the SPDR gold ETF (GLD) but purchases of 0.45 of a tonne into the Gold Trust (IAU) yesterday. This is the first time in recent weeks we have seen sales of size from the SPDR gold ETF. It certainly helped the gold price to slip down.

What happen when such sales takes place is that HSBC, the Custodian of the Fund, can then sell that into China straight away and yet it won’t impact on London or New York prices. But HSBC cannot do the reverse by taking gold from China and selling it in London as it is illegal to export gold from China. And this is why selling in a market where globally, buying far outweighs selling, prices can be made to fall. It continues to favor buying in Asia when this happens.

So while there are cries of “manipulation” to hold prices down, the evidence is that the structure of the gold market globally favors Asia continuing to buy gold at very low prices. While the banking and currency systems favor gold remaining out of favor, what is happening now is a ticking time bomb, taking us to the point where Asia controls the gold market and soon the gold price.

We continue to see gold and silver markets remaining very volatile in New York in the coming days as liquidity levels remain under visible pressure. However, after yesterday, we expect the volatility to come in, taking gold higher. Bear in mind, please, that physical gold buying in these markets does not create ‘spikes’. We expect COMEX to cause volatility as liquidity pressures continue, while London calms the market.

Silver – The silver price is on the back foot now waiting for gold to go higher.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

 

Gold and silver markets: Asia rising – all positive

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Gold Today –Gold closed in New York at $1,260.80 down from $1,262.20 on Friday. In Asia on Friday, it moved higher until the LBMA price setting was set at $1,267.60 down from $1,271.50 on Friday. The dollar index is slightly higher at 97.61 up from 97.52 on Friday.

The dollar is up against the euro at $1.0963 from $1.0981 Friday. The gold price in the euro was set at €1,156.25 down from €1,157.91.

Ahead of New York’s opening, the gold price was trading at $1,270.00 and in the euro at €1,158.44.  

Silver Today –The silver price closed in New York at $15.49 up 27 cents.  Ahead of New York’s opening the silver price stood at $15.67.

Price Drivers

China has debt which stands at 250% of GDP. This sounds unsustainable, but because it is mainly internal it is under its control. So expect to see more corporate local debt become government debt in the months to come. The corporate dollar debt is being paid down, so capital outflows should be seen not as capital fleeing lower growth, but mainly debt reduction. What does this say for gold? It clarifies that middle classes will continue to grow and that China will not have a ‘hard landing’. This comes from the Government conference being completed now. This remains gold positive.

Gold ETFs An amount of 0.215 of a tonne was sold from the SPDR gold ETF and a purchase of 0.3 of a tonne was bought into the Gold Trust before trading was suspended in the Trust, pending permission to issue more shares is given. The Trust remains healthy and likely its shares will trade at a premium before permission is gained to issue more shares. The holdings of the SPDR gold ETF are now at 793.117 tonnes and at 191.07 tonnes in the Gold Trust.  The sale out of GLD was outweighed by the purchase into the Gold Trust. Neither had an impact on the gold price!

The gold price, once again, was pulled back in New York this time by over $11 by dealers fearing more selling. But such pullbacks in volatile markets simply incite more physical buying. There does come a point where New York’s prices are pulled up by physical buying an example of which we saw last Friday, when the LBMA gold price setting was higher than market trading at $1,271.50. In addition short covering continues with COMEX increasing its long positions now.

We do see gold and silver markets remaining very volatile in the coming week as liquidity levels remain under visible pressure.

China Construction Bank joins the LBMA silver price – CME Benchmark Europe Limited and Thomson Reuters have operated the LBMA Silver Price since August 2014 when they took over responsibility from the London Silver Market Fixing Limited. CCB will be the first Chinese bank and the sixth price participant, joining HSBC Bank USA NA, JPMorgan Chase Bank, The Bank of Nova Scotia, The Toronto Dominion Bank and UBS AG.

We expect a similar announcement to be made shortly for the ICBC to be made a clearing member of the LBMA gold price.

This is yet another step in the various stages of gold and silver market re-structuring by China as it moves structures to a truly global gold and silver price and away from one dominated by COMEX and London.

We see the major changes in both the global monetary system and the precious metal markets as fundamental and long-term. The world is changing and truly going to reflect the rise of Asia.

Silver – The silver price is running forward ahead of gold and should continue to do so.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

Gold ETFs continue building; Silver decouples downwards

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Gold Today –Gold closed in New York at $1,222.80 down from $1,233.00. In Asia on Monday, it rose to $1,231.25 ahead of London’s opening. It then rose further to be set by the LBMA at $1,234.15 up from $1,231.00.  Since Friday’s setting, gold fell to $1,212 but not on physical selling. The dollar index is stronger at 98.25 up from 97.39 on Friday.

The dollar is up against the euro at $1.0895 up from $1.10248 on Friday. The gold price in the euro was set at €1,132.77 up from €1,116.65.

Ahead of New York’s opening, the gold price was trading at $1,232.00 and in the euro at €1,131.05.  

Silver Today –The silver price closed in New York at $14.65 down 48 cents.  Ahead of New York’s opening the silver price stood at $14.80.

Price Drivers

The result of the G-20 meetings, as usual, were disappointing. There was no real consensus on government support for solid growth and a warning was given by Mark Carney of the Bank of England that monetary policy was not sufficient to stimulate growth and that negative interest rates directly weaken exchange rates, eventually to no avail. The E.U. and Japan were the targets of this statement.

More importantly it is clear that if such policies were not halted it will be ‘every man for himself’ in a currency ‘war’! The euro went much weaker this morning as perhaps more negative interest rates were on the way. The Yen remains strong, still attracting capital.

Gold ETFs On Friday there were purchases of 2.82 tonnes into the SPDR gold ETF and purchases of 0.27 of a tonne into the Gold Trust. The holdings of the SPDR gold ETF are now at 762.405 tonnes and at 188.52 tonnes in the Gold Trust.   While Friday saw smaller but continuous purchases they were not heavy enough to have a forceful effect on the gold price. Please note that the price remains in the hands of U.S. investors.

Indian demand remains on the sidelines until the Indian budget details are out, today. Demand was held back hoping for a cut in duties in the last week. If duties are cut then the demand will jump as buyers see up to a 10% cheaper price there. That brings prices down from [see below] nearly Rs.85,000 an ounce to Rs.76,500. That will draw out new Indian demand. It will also make it much more attractive for Indian investors as the ‘spread’ on prices will narrow significantly, making both trading and investment more attractive.

It is feasible that the Indian government will drop duties, because the Trade Balance of Payments has improved significantly because of the plunge in oil prices, giving space for a popular decision such as the lowering of duties on gold.

Silver – For the first time in years the silver price broke away from the gold price and fell heavily. Yes, the gold price did fall and attempted to threaten the Technical picture for gold, but has started the week higher in a much better Technical picture. So we have to watch to see if silver will bounce back, like gold or has it really broken away. How it performs today will guide us on this. So today is a day for gamblers while professionals gauge the picture carefully.  

 

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

Gold – an investment without national boundaries

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Gold This Morning –The New York gold price closed Monday at $1,190.20 up from $1,173.60 up $16.60. Ahead of London’s opening some prices were quoted at $1,186 but as the market started to open, it rapidly climbed back to $1,193. Then the LBMA set it at $1,188.90 up from Monday’s $1,173.80 up $15.10 with the dollar index down slightly at 96.04 down from 96.97 on Monday. The dollar continues weaker against the euro at $1.12885 down from $1.1156 against the euro on Monday. The gold price in the euro was set at €1,053.20 up from €1,052.17. Ahead of New York’s opening, the gold price was trading at $1,193.30 and in the euro at €1,058.64.  

Silver This Morning –The silver price in New York closed at $15.31 up 27 cents at Monday’s close.  Ahead of New York’s opening, the silver price stood at $15.30.

Price Drivers

This morning across the globe, markets are falling around 5% taking nearly all of them close to a ‘bear’ market as defined by a 20% drop from their peaks. Markets are discounting slow growth across the world and a poor growth scene. Investors from the U.S. are pushing into gold now and as we have said for a long time now, once investors turn back to gold they will find it hard to get what they want and cause a rapid rise in gold prices. This is happening as we see now. In a bear market investors run to cash or short dated securities within their nation, but the beauty of gold is that is has no boundaries in the financial world. It is cash and an asset with no national obligations. Right now it is a haven. More surprisingly investors are turning to the Yen and to some extent the euro as they flee the dollar. Both these currency areas are doing their best to force their exchange rates down and not be a ‘safe haven’.

Let’s be clear, this is not a short-term panic from which markets will recover quickly. It denotes real and present dangers in the financial world. Global banks are suffering this morning as debt holdings take a higher risk as global debt burdens are far too high for shrinking economies. The markets are pricing in these higher risks too! Are we facing a debt breakdown in global markets?

If market emotions continue to point to debt crises and full bear markets in equities, gold and silver are going to come into their own.

Monday saw yet another large purchase of 5.056 tonnes into the SPDR gold ETF, making just under 10 tonnes bought this week. One more day of this and we will have recovered all the gold sold from the SPDR gold ETF in 2015.  We also saw another 0.75 of a tonne added to the Gold Trust. The holdings of the SPDR gold ETF are now at 703.518 tonnes and at 173.78 tonnes in the Gold Trust. We are entering “extreme times” in which gold and silver flourish.
Julian D.W. Phillips for the Gold & Silver Forecasters – www.goldforecaster.com and www.silverforecaster.com

What does peak gold mean for the gold price

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Herewith intro paragraphs for a new article posted by me on sharpspixley.com website

Let us say, for argument’s sake, that the latest GFMS analysis of global gold production is correct and global new mined gold production falls by around 3% in 2016 – the first such fall in around seven years.  This would see, according to GFMS estimates, output fall by a little under 100 tonnes this year.  But would this fall make much, if any, difference to real supply/demand fundamentals and to the gold price itself?

On the margins maybe, and in terms of perception, but there are other supply and demand factors out there which are arguably far more significant than a 100 tonne fall in newly mined gold.  Indeed 100 tonnes, which only represents around 2% of total global annual gold supply, could be seen as a relatively small figure in terms of overall gold flows.  Other supply elements out there have a greater effect on global availability of physical gold and also in relation to total supply, which GFMS estimates at 4,274 tonnes last year.

Let’s take purchases and sales into the major gold ETFs to start with.  These have the potential to dwarf any new mined production changes.  For example we are only one month into 2016 and the major gold ETFs saw purchases of around 2 million ounces of gold – that’s over 60 tonnes – in January alone……..

To read full article CLICK HERE

Bear raid batters gold

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New York closed Friday at $1,133.90 down $11.20. In Asia the gold price fell $20 to $1,113 ahead of London’s opening.  London barely lifted it back to $1,115. The dollar was stronger at $1.0834 up from $1.089, against the euro, with the dollar Index at 98.02 up from 97.54.  The LBMA gold price was set this morning at $1,115 down $28.00, after a heavy sale at the close in New York on Friday. The euro equivalent was €1,029.31 down €20.08. Ahead of New York’s opening, gold was trading in London at $1,114.60 and in the euro at €1,028.56.

The silver price fell to $14.89 down 12 cents in New York. Ahead of New York’s opening it was trading at $14.75.

With the Technical picture looking bad we saw a remarkable ‘bear raid’ at the close in New York too late to affect that market. But it translated into Asia and London prices falling $20 down from the close in New York. Evidence that this was a ‘bear raid’ was given by a static silver price this morning which was the same as the close in New York. There were sales of 11.626 tonnes from the SPDR gold ETF [but none from the Gold Trust] leaving the holdings of the SPDR gold ETF at 696.252 tonnes and 167.76 tonnes in the Gold Trust.

One can use these ETF positions to ‘short’ the market so their motive appears to be to trigger ‘stop loss’ protections and try to panic the market lower.  We have seen repeated attempts like this ‘raid’ to achieve this in the last few weeks with the biggest moves in prices happening at the close or opening of a market with trade during that market’s day being insufficient to move prices much. This sale of over 10 tonnes is the second one this month but because of the timing and size, does not have the ‘shape’ of a long term investor closing a position.  What it has achieved is to take prices down to very close to the downside target indicated by the Technical picture.

At a time of the year when Indian markets are in their summer ‘doldrums’ with the developed world factoring in a change of trend in interest rates to the upside combined with a stronger dollar, speculators saw a chance to launch the bear raid.  The question is, “Is this a final sell-off?”

On the fundamental side very few of the world’s gold mines are now profitable, so if such prices persist, watch their ‘lives’ being shortened as they switch to their high grade reserves and away from low grade reserves. Others may be forced to close down. Such industry action reduces supply after a while and forces prices back up as demand outweighs supply.

More importantly a major U.S. banks survey saw their institutional clients now see gold as offering an opportunity to take positions.

Julian D.W. Phillips for the Gold & Silver Forecasters – www.goldforecaster.com and www.silverforecaster.com

Gold, silver, pgms crash on overnight Shanghai trades

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While Chinese volumes may have been seen as lending support to gold and other precious metals prices through continuing high gold withdrawals on the Shanghai Gold Exchange and strong import levels, today the reverse has been true.  A reported sale of 5 tonnes of gold into the SGE has really rocked the markets, at one time driving the spot gold price down below the $1100 level, although European trading brought it back up again – but still well down on the previous day’s levels.  Julian Phillips writing here suggests that the bear raid commenced in New York, while John Meyer at London broker/banker S.P. Angel noted the Chinese element was thought to have been made into China’s smaller gold market half an hour after the market opened to take advantage of the lower liquidity and fragile market environment.

Overall, uncertainty about what prompted this big gold sale is rife.  Could it be for a liquidity necessity following the big recent Chinese stock market crash, or could it be the Chinese falling out of love with gold?  Or could it be a big gold dump on the SGE international section, tied in with a big sale out of the gold ETFs on Friday?  The evidence suggests it may well be the latter. One supposes time will tell.

Germany’s Commerzbank in its daily commentary reported it thus: “Crash on the gold market – as the new week gets underway, the price of one troy ounce plunged for a time by up to 5% or around $50 to just over $1,080 during the course of early trading, thus hitting its lowest level since February 2010. It has meanwhile recouped over half of these losses again. In euro terms, gold dipped temporarily to a 6½-month low of a good €1,000 per troy ounce.

“The price slide was triggered by high selling volumes on the gold exchange in Shanghai. According to figures from Reuters, over a million lots were traded there in one key contract. Apparently, the average figure so far in July had been below 30,000 lots….

“All other precious metals are also under pressure in gold’s slipstream: silver has been trading for a time at a 7½-month low of $14.5 per troy ounce, while platinum dropped for a while to a 6½-year low of less than $950 per troy ounce and palladium hit its lowest level since October 2012 (a good $600 per troy ounce).”

Commerzbank also noted increased pessimism on precious metals on COMEX, a further retreat by gold ETF investors who, according to Bloomberg, sold out of 15.7 tonnes on Friday – the biggest daily decline in 2 years, while it sees the Greek situation and China’s lower than expected new gold as being of relatively little significance.