More gold going into GLD. Druckenmiller back as gold buyer.

Gold Today –New York closed at $1,233.00 on the 7th February after closing at $1,234.70 on the 6th February. London opened at $1,232.00 today.

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

         The $: € was weaker at $1.0672: €1 from $1.0666: €1 on yesterday.

         The Dollar index was weaker at 100.45 from 100.62 on yesterday. 

         The Yen was weaker at 112.38:$1 from yesterday’s 112.19 against the dollar. 

         The Yuan was weaker at 6.8860: $1, from 6.8790: $1, yesterday. 

         The Pound Sterling was stronger at $1.2514: £1 from yesterday’s $1.2363: £1.

Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    2    08

     2017    2    07

      2017    2    06

SHAU

SHAU

SHAU

/

273.34

269.93

/

274.38

271.92

$ equivalent 1oz @  $1: 6.8790

      $1: 6.8790

$1: 6.8625

  /

$1,235.91

$1,232.81

/

$1,240.61

$1,232.45

 Shanghai was trading in gold at 275.00 Yuan during today’s session before London opened. This equates to $1,242.15. Shanghai is $4 higher than New York and more than $5 higher than Lomdon, but prices today have been heading in that direction.

LBMA price setting:  The LBMA gold price was set today at $1,235.60 up from yesterday’s $1,231.00.  

The gold price in the euro was set higher at €1,160.51 after yesterday’s €1,152.89.

Ahead of the opening of New York the gold price was trading at $1,237.00 and in the euro at €1,161.78.  At the same time, the silver price was trading at $17.74. 

Silver Today –Silver closed at $17.71 at New York’s close Friday against $17.73 on the 6th February. 

 Price Drivers

While U.S. based gold investors have returned to the gold market via the SPDR [GLD] gold ETF, we had not heard of any large gold investors returning until now. Today we have received reports that Stan Drukenmiller, having exited the gold market in December, has returned to it.

He is a short to medium trader but a very large one, with his fund. So he can exit just as fast. But he is the type of gold investor that leads the way for others.

We had almost forgotten Greece’s debt problems and then suddenly it’s back. The expected economic recovery is just not producing the results creditors wanted. It will not be able to meet its obligations shortly, so Germany wants more austerity and less pensions.

This may be the straw that breaks the camel’s back. Will Greece leave the euro and E.U.? At this stage, bearing in mind Prime Minister Tsiprias’ actions last time, we think not, but certainly it adds to the negative situation in the E.U. Add to that France’s elections and Italy’s woes and we see a Europe on the brink and unlikely to survive in its present form. This is gold positive.

With Japan now dumping U.S. Treasuries as yields rise, causing capital losses the U.S. bond market is falling and very vulnerable to more large falls as yields continue to rise. It was inevitable. With so many simmering sources of trouble the natural inclination to see only the best may not serve us well.

Gold ETFs – Yesterday we saw 8.295 tonnes of gold bought into the SPDR gold ETF (GLD) and 0.39 of a tonne into the Gold Trust (IAU).  Their respective holdings are now at 826.948 tonnes and 200.30 tonnes. 

This large purchase yesterday into the SPDR gold ETF doubled the amount bought by U.S. investors into U.S. gold ETFs since the beginning of this year.  

We expect U.S. Investors to follow the lead of these hedge funds.

Since January 4th 2016, 226.638 tonnes of gold have been added to the SPDR gold ETF and to the Gold Trust.  Since January 6th 2017 16.557 tonnes have been added to the SPDR gold ETF and the Gold Trust.
 Julian D.W. Phillips: GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

Banks and Dealers positioned for higher Gold price. GLD continues to add gold

Gold Today –New York closed at $1,234.70 on the 6th February after closing at $1,219.00 on the 5th February. London opened at $1,230.00 today.

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

         The $: € was stronger at $1.0666: €1 from $1.0750: €1 on yesterday.

         The Dollar index was stronger at 100.62 from 99.96 on yesterday. 

         The Yen was stronger at 112.19:$1 from yesterday’s 112.62 against the dollar. 

         The Yuan was weaker at 6.8790: $1, from 6.8625: $1, yesterday. 

         The Pound Sterling was weaker at $1.2363: £1 from yesterday’s $1.2457: £1.

 Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    2    07

     2017    2    06

      2017    2    03

SHAU

SHAU

SHAU

/

272.00

269.93

/

271.92

269.52

$ equivalent 1oz @  $1: 6.8790

      $1: 6.8625

$1: 6.8632

  /

$1,232.81

$1,223.30

/

$1,232.45

$1,221.44

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 trading in gold at 274.3 Yuan during today’s session before London opened. This equates to $1,240.25. Shanghai now has momentum and was trading just 55 cents above New York’s close.

LBMA price setting:  The LBMA gold price was set today at $1,231.00 up from yesterday’s $1,221.85.  

The gold price in the euro was set higher at €1,152.89 after yesterday’s €1,137.45.

Ahead of the opening of New York the gold price was trading at $1,230.75 and in the euro at €1,152.77.  At the same time, the silver price was trading at $17.64. 

Silver Today –Silver closed at $17.73 at New York’s close Friday against $17.46 on the 3rd February. 

Price Drivers

What is now very clear is that if Marine le Pen and her party are elected, France will likely leave the E.U. Yesterday saw a plan to leave the E.U. produced by her party. It could involve a dual currency. Some have said that a dual currency never works. On the contrary dual currencies have pulled several nations out of a hole, including the U.K. in the early seventies. One currency for commercial transactions and another for capital. The ‘Dollar Premium’ used by the U.K. was structured not only to prevent capital leaving but gave incentives to capital coming in. It worked so well that after the crisis then, there was a return to a single currency and no capital exited thereafter that could not be managed. At Gold Forecaster we wrote at length that this was an option for Greece years ago. Properly handled such dual currencies are ideal in the case of a nation like France that faces the risk of a capital exit and the return of the French Franc. It must be accompanied by Capital/Exchange Controls at the same time during the period of transition.

In response to the promise of a return to the French Franc Mario Draghi had a sense of humour failure and stated that the euro was irreversible.  So the issue of sovereignty both in the E.U. and in the member states is on the table! Even Britain may lose a member nation, Scotland.

Such an introspective national posturing is very good for gold as it highlights the weaknesses inherent in national currencies, producing falling confidence in them. Hence the need for a non-national asset that is acceptable internationally, even between enemies and those uncreditworthy nations. Gold has always filled that role, lasting throughout history. National currencies have not.

But as we said yesterday, “The moment such talk hits the airwaves, the moment we hear that will mean a collapsing euro. We cannot buy that at all”. The strong members remaining will re-group behind the euro.

Gold ETFs – Yesterday we saw 4.418 tonnes of gold bought into the SPDR gold ETF (GLD) but no change was seen in the holdings of the Gold Trust (IAU).  Their respective holdings are now at 818.653 tonnes and 199.91 tonnes. 

Yesterday’s large purchase of gold into the SPDR gold ETF added to the ongoing steady buying pattern that began last week.

As we said yesterday, “The buying is persistent enough for the bullion banks to keep their books ‘long’ of gold. The potential for any shortage of open market stocks is great now, as the mood towards gold goes positive. So dealers and banks have re-positioned themselves for higher prices.”

Since January 4th 2016, 217.953 tonnes of gold has been added to the SPDR gold ETF and to the Gold Trust. 
 Julian D.W. Phillips:  GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

Investors Shift Back into Gold as Trump’s Honeymoon Period Ends

By Frank Holmes – CEO and Chief Investment Officer US Global Investors

Investors Shift Back into Gold as Trump’s Honeymoon Period Ends

That didn’t take long.

After little more than two weeks, President Donald Trump’s honeymoon with Wall Street appears to have been put on hold—for the moment, at least—with major indices making only tepid moves since his January 20 inauguration. That includes the small-cap Russell 2000 Index, which surged in the days following Election Day on hopes that Trump’s pledge to roll back regulations and lower corporate taxes would benefit domestic small businesses the most.

Is Trump's Honeymoon with Wall Street Over Already?
click to enlarge

And therein lies part of the problem. Although the President managed to sign an executive order last week requiring the elimination of two federal regulations for every new rule that’s adopted (and ordered a review of Dodd-Frank and former President Obama’s fiduciary rule), other campaign promises that initially excited investors—tax reform and an infrastructure spending deal among them—might have already hit a roadblock.

According to Reuters, a three-day meeting in Philadelphia between President Trump and congressional Republicans ended in a stalemate, with it looking less and less likely that tax reform will happen during Trump’s first 100 days in office—perhaps even the first 200 days. As for infrastructure, several Republicans were reportedly wary of committing to such an enormous spending package before more complete details become available.

Travis Kalanick, Uber CEO, dropped out of Trump's business advisory panel

Meanwhile, Trump’s seven-nation travel ban received a lukewarm—and, in some cases, hostile—reception from many in the business world who have traditionally depended on foreign talent. That’s especially the case in Silicon Valley, where close to 40 percent of all workers are foreign-born, according to the 2016 Silicon Valley Index. (Around the same percentage of Fortune 500 companies were founded by immigrants or children of immigrants, including Steve Jobs, whose biological father was Syrian.) One of the more dramatic responses toward the travel ban was Uber CEO Travis Kalanick’s dropping out of Trump’s business advisory panel, following an outcry from users of the popular ride-sharing app who saw his participation with the President as an endorsement of his immigration policies.

Notable Silicon Valley Immigrants

I’ve shared with you before that the media often take Trump literally but not seriously, whereas his supporters take him seriously but not literally. I think it’s evident that the market is finally coming to terms with the fact that Trump, unlike every other politician before him, actually meant everything he said on the campaign trail, including his more protectionist and nationalist ideas.

Although I don’t necessarily agree with Trump’s plans to raise tariffs, withdraw from free-trade agreements and restrict international travel, it might be easy to some to see why he feels American companies need protecting from foreign competition. Last week I attended the Harvard Business School CEO Presidents’ Seminar in Boston, and among the topics we discussed was China’s ascent as an economic and corporate juggernaut. Take a look at the chart below, using data from Fortune Magazine’s annual list of the world’s 500 largest companies by revenue. Whereas the U.S. has lost ground globally over the past 20 years, China’s share of large companies has exploded, from having only three on the list in 1995 to 103 in 2015. The number of Japanese firms, meanwhile, has more than halved in that time.

U.S. Has Lost Share of World's Largest Companies to China
click to enlarge

I will say, while I’m on this topic, that the uncertainty and unpredictablilty surrounding Trump has given active management a strong opportunity to demonstrate its value in the investment world. Assessing the risks and implications of his actions, policies and tweets, which change daily, really requires a human touch that fund managers and analysts can provide.

Dollar Down, Gold Up

One of those implications is the U.S. dollar’s decline. Following Trump’s comment that it was “too strong” and hurt American exporters’ competitiveness, currency traders shorted the greenback, causing it to have the worst start to a year since 1987.

U.S. Dollar Has Rockiest Beginning of the Year Since 1987, Boosting Gold
click to enlarge

This, coupled with a more dovish Federal Reserve, expectations of higher inflation and growing demand for a safe haven, has helped push gold prices back above $1,200 an ounce. January, in fact, was the best month for the yellow metal since June, when Brexit anxiety and negative government bond yields sent it to as high as $1,370.

Gold Posts Its Biggest Monthly Gain Since June 2016
click to enlarge

Demand for gold as an investment was up a whopping 70 percent year-over-year in 2016, according to the World Gold Council. Gold ETFs had their second-best year on record. But immediately following the November election, outflows from gold ETFs and other products accelerated, eventually shedding some 193 metric tons.

But now, just two weeks into Trump’s term as President, the gold bulls are banging the drum, with several large hedge fund managers taking a contrarian bet on the precious metal.

Inflationary pressures are indeed intensifying. U.S. consumer prices rose 2.1 percent in December year-over-year, their fastest pace since 2014, and inflation across the globe is beating market forecasts, with the Citi Global Inflation Surprise Index turning positive for the first time since 2012. Anything above zero indicates that actual inflation is stronger than expectations for the month.

Global Inflation Beats Expectations in December for the First Time Since 2012
click to enlarge

 

Gold firm – seeing good support as GLD adds more gold

Gold Today –New York closed at $1,219.00 on the 3rd February after closing at $1,215.30 on the 2nd February. London opened at $1,223.20 today.

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

         The $: € was slightly stronger at $1.0750: €1 from $1.0758: €1 on Friday.

         The Dollar index was getting stronger at 99.96 from 99.88 on Friday. 

         The Yen was stronger at 112.62:$1 from Friday’s 113.12 against the dollar. 

         The Yuan was stronger at 6.8625: $1, from 6.8632: $1, Friday. 

         The Pound Sterling was weaker at $1.2457: £1 from Friday’s $1.2524: £1.

 Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    2    06

     2017    2    03

      2017    1    31

SHAU

SHAU

SHAU

/

269.93

/

/

269.52

/

$ equivalent 1oz @  $1: 6.8625

      $1: 6.8632

$1: 6.8772

  /

$1,223.30

/

/

$1,221.44

/

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 trading in gold at Yuan 269.85/gramme during today’s session before London opened. This equates to $1,223.06. For the first time in the last month all global gold markets appear in line. The reality is that Shanghai is lower due to the higher quality of gold it prices at $1,218.06. Therefore New York and London are higher than Shanghai. It’s the first time we have seen this, this year.

We need to make allowances for the fact that the Lunar New Year holiday only finished last Thursday. It’s still gaining trading momentum.

LBMA price setting:  The LBMA gold price was set today at $1,221.85 down from Friday’s $1,213.05.  

The gold price in the euro was set higher at €1,137.45 after Friday’s €1,129.78.

Ahead of the opening of New York the gold price was trading at $1,226.55 and in the euro at €1,141.83.  At the same time, the silver price was trading at $17.62. 

Silver Today –Silver closed at $17.46 at New York’s close Friday against $17.47 on the 2nd February. 

Price Drivers

With Shanghai still gathering cruising speed, London and New York are looking firm. The gains of Friday are still holding as President Trump continues to stir the pot on all fronts. But the currency front looks quiet at the moment. The dollar index has fallen through support and looks like we will see weakness, a factor favoring gold.

The market today looks as though it has built a base above support just above $1,200 and is set to rise. Continued U.S. ETF physical buying points to a palpable change to the positive, in the U.S. and London gold markets.

Remarkably we hear the German Finance Minister informing the world that the euro is too weak to benefit Germany. Is this a misquote? Was he serious? Nothing has helped Germany more since the euro was invented than that weak currency. By tying weak economies into a single currency in Europe, Germany has managed to drain capital and skills to itself because of its robust exports and strong economy. If the euro had not been weak and Germany retained the Deutschemark, it would have priced German goods out of the market long ago!

What is becoming clear to all is that Marine le Pen in France may well do a Trump in the coming elections. If she takes the French Presidency she will have a referendum to leave the E.U. And the media there is doing what the media did in the U.S. and persistently talked down that eventuality.

It is also clear that Italy is facing a crisis that brings it into the ‘want to exit’ the E.U., making a ‘Europe Unie’ a dubious concept. We hear many reports now on how Italy may well head to the exit too.

The moment such talk hits the airwaves, the moment we hear that will mean a collapsing euro. We cannot buy that at all

But with the weakening dollar, gold is doing well. But please note it is not just rising against the dollar, but against all currencies.

Gold ETFs – On Friday we saw 3.287 tonnes of gold bought into the SPDR gold ETF (GLD) but no change was seen in the holdings of the Gold Trust (IAU).  Their respective holdings are now at 814.505 tonnes and 199.91 tonnes. 

We are now seeing a steady pattern of gold buying into the U.S. based gold ETFs. In turn, this is pulling London up as the gold for these ETFs are sourced in London. We believe the London banks will not delay in buying as this could cause them to lose out as prices rise.

The buying is persistent enough for the bullion banks to keep their books ‘long’ of gold. The potential for any shortage of open market stocks is great now, as the mood towards gold goes positive. So dealers and banks have re-positioned themselves for higher prices.

Since January 4th 2016, 213.535 tonnes of gold has been added to the SPDR gold ETF and to the Gold Trust. 

 Julian D.W. Phillips:   GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

Get It, Got It, Gold 2 – The Presentation

Nearly a couple of months ago now we reported on Grant Williams’ December Things that make you go hmm…(TTMYGH)  newsletter entitled Get it, Got it, Good  which in turn was based on Grant’s presentation at last year’s Mines and Money London given in December, shortly after the election of Donald Trump as President of the USA. To read the original article click here.

We would highly commend Grant’s newsletter – it’s one of the few I get which I always read from start to finish as it gives a unique, and hugely valuable analysis of geopolitics, and geo-economics.  The reason I am returning to this is that Grant has now published the full video of his Mines & Money presentation without it being behind his newsletter subscription wall and I would commend all Lawrieongold readers to view it.  To do so click here.  The presentation highlights how Trumponomics differs from Reaganomics, although there are some common angles, and how much U.S. and global geopolitics/economics have changed since President Reagan’s policies set the U.S. economy on its then upwards path.  Don’t necessarily expect the Trump version to do the same is one of the messages.

Obviously I have altered the title here to insert ‘Gold’ instead of the ‘Good’ of Grant’s original – a title based on a verbal exchange between Danny Kaye and Basil Rathbone in the 1955 film – The Court Jester. This is because part of the comment involves the gradual demise of the petrodollar and the likely positive effects on gold of what Grant sees as the possibility for effectively exchanging oil for gold via the Shanghai Gold Exchange and a fully convertible yuan. A number of countries are now attempting to bypass the petrodollar and, at the same time, reduce their proportions of holdings of U.S. Treasuries in their foreign exchange totals as perhaps the world starts reducing its reliance on the greenback in global trade.  Grant sees all this as gold positive in the long term.

As an aside, the other newsletters I tend to read from start to end every issue are Otto Rock’s (pseudonym) often irreverent Inca Kola News daily blog posts digest – to keep abreast of the nefarious goings on within the Canadian junior mining markets, with particular reference to Latin American pump and dump operations and other scams.  Otto often uses language I would hesitate to  use myself – but which almost always makes for extremely interesting, and often amusing,  reading.  If you are interested in the Canadian junior miners sector this should be must reading in helping you sort the wheat from the chaff: Click on http://incakolanews.blogspot.co.uk/ .  The IKN daily digest is free, but Otto also publishes a paid weekly newsletter which offers specific investment advice.

I also read Ed Steer’s daily paid newsletter.s gives a somewhat right wing view on geopolitics and precious metals, but that covers angles often ignored by the mainstream media so is invaluable in highlighting aspects that one might otherwise not have access to without trawling through dozens of websites on a daily basis.  It also carries daily informed commentary on what is going on in the U.S. precious metals futures markets.

U.S. Gold ETF Buyers Back In Force

Gold Today –New York closed at $1,215.30 on the 30th January after closing at $1,190.90 on the 27th January. London opened at $1,213.50 today.

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

         The $: € was weaker at $1.0758: €1 from $1.0711: €1 on the 30th January.

         The Dollar index was weaker at 99.88 from 100.34 on the 30th January. 

         The Yen was slightly stronger at 113.12:$1 from the 30th January’s 113.66 against the dollar. 

         The Yuan was stronger at 6.8632: $1, from 6.8772: $1, on the 30th January. 

         The Pound Sterling was stronger at $1.2524: £1 from the 30th January’s $1.2502: £1.

 With Shanghai open today for the first time since last Thursday, we won’t have the two daily Fixes for today until tomorrow. Meanwhile, Shanghai was trading today at 269.80 towards the close today after their return from the big annual holiday. This equates to $1,222.71.  This leaves it just $2 higher than the close in New York.

LBMA price setting:  The LBMA gold price was set today at $1,213.05 down from yesterday’s $1,224.05.  

The gold price in the euro was set higher at €1,129.78 after Monday’s €1,119.85.

Ahead of the opening of New York the gold price was trading at $1,212.00 and in the euro at €1,128.39.  At the same time, the silver price was trading at $17.34. 

Silver Today –Silver closed at $17.47 at New York’s close yesterday against $17.15 on the 30th January. 

 Price Drivers

We have been away from our desk since Monday and clearly missed a positive change in tone in London’s gold market due to the significant return of investors into the U.S. based gold ETFs. The shares U.S. investors bought into the SPDR gold ETF translated into buying of physical gold in London Wednesday.

On COMEX yesterday there was a jump in the volume of call options bought enjoying the rise in the gold price.

Shanghai’s opening today brought no fireworks. The gold price there is roughly in line with New York and London, so we have yet to see Chinese demand come to life still. With seasonal gold buying there over, we expect to see commercial gold trading come to life before retail trading as it will take time before retail buying comes back With the gold price still above $1,200, there is little enthusiasm to hunt for bargains. We remain in consolidation mode today.

President Trump’s latest actions continue to dominate world news and both in the U.S. and the rest of the world looks through a mixture of horror, delight and amazement at his actions. We expect his presidency to be world changing, already bringing in uncertainty.

We have no doubt that his review of the Dodd-Frank act will be followed by him fulfilling election promises of lower taxes and infrastructure spending.

Gold ETFs – Since the 30th January we have seen 12.148 tonnes of gold bought into the SPDR gold ETF (GLD) and 1.01 tonnes of gold bought into the Gold Trust (IAU).  Their respective holdings are now at 811.218 tonnes and 199.91 tonnes. 

This is a large amount when we look at the influences on the gold price in the last two days. It also explains why the gold price broke higher in London’s morning yesterday to Fix at $1,224.05. The pull back in New York does not yet reflect this big purchase but should do so today.

Since January 4th 2016, 210.248 tonnes of gold has been added to the SPDR gold ETF and to the Gold Trust. 

 Julian D.W. Phillips:  GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

World Gold Council’s Latest Gold Demand Trends Report

The World Gold Council (WGC)’s quarterly Gold Demand Trends report is always well worth analysing as it contains some excellent statistical research on global gold supply and demand supplied by London based precious metals consultancy, Metals Focus.  One may not agree with all their data, but overall it is among the most comprehensive available to the gold market analyst.  Here follows the WGC’s own release on the latest report, published today, and links to enable readers to access the full data set:

Gold demand rises 2% in 2016 as investment surges

Global gold demand rose 2% in 2016 to reach 4,309 tonnes (t), the highest level since 2013, according to the World Gold Council’s latest Gold Demand Trends report. This was largely driven by inflows into gold-backed Exchange Traded Funds (ETFs) of 532t, the second-highest year on record, as investors responded to concerns over future monetary policy, geopolitical uncertainty and negative interest rates.

Continued global economic and political uncertainty, most notably Brexit, the US election and currency weakness in China, helped to boost overall investment demand by 70%, to a four-year high of 1,561t.   The price dip in November led to a strong recovery in the bar and coin market in the final quarter of 2016, although this didn’t offset weak demand in the first three quarters; annual demand reached 1,029t, down 2% year-on-year.

Alistair Hewitt, Head of Market Intelligence at the World Gold Council, commented: “2016 saw an unprecedented degree of political upheaval, which underpinned huge institutional investor flows into gold. Retail investors – having been subdued for most of the year – responded quickly to the price fall in Q4, a fact reflected by a surge in demand in the physical market. With an equally uncertain political and economic environment likely in 2017, we expect investment demand to remain buoyant.”

While overall investment demand rose sharply, it was counterbalanced by declines in both jewellery, a 15% fall in 2016 to 2,042t, and central bank purchases. Central banks faced a challenging backdrop, with increased pressure on foreign exchange reserves resulting in demand falling by 33% to 384t for the year. Despite this, 2016 was the seventh consecutive year of net purchases by central banks.

In spite of resilient consumer demand in the fourth quarter of 2016, the two leading gold markets, India and China, both experienced a drop in consumer buying in 2016, falling 21% and 7% respectively. In China, jewellery demand was dampened due to a high gold price throughout much of the year, coupled with constrained levels of supply in Q4, owing to a tightening of currency controls in the country.

Indian demand also faced a raft of challenges throughout the year, including regulatory changes, culminating in the surprise demonetisation policy, which severely hampered demand in both the jewellery and retail investment sectors.

Alistair Hewitt added: “The Indian market faces a challenging time in 2017. We anticipate many of the headwinds that affected demand in 2016 to continue into this year, but we are confident that the Government’s move towards a more transparent gold market will ensure that gold remains an important asset class for millions of people in India.”

Total supply reached 4,571t in 2016, an increase of 5% compared with 2015. Growth in the sector was supported by net producer hedging, which doubled in 2016, as gold producers saw an opportunity to secure cashflow at higher prices. It was also supported by high levels of recycling in Europe and the Middle East, driven by weak currencies and a high gold price. Mine production remained virtually unchanged from 2015 as a result of industry cost-cutting schemes, however, higher gold prices and lower costs have seen a renewed interest in exploration and increased project development is likely in the years ahead.

The key findings included in the Gold Demand Trends Full Year 2016 report are as follows:

Full year 2016 figures:

  • Overall demand for FY 2016 was 4,309t, up 2% compared with 4,216t in 2015
  • Total consumer demand for FY 2016 fell by 11% to 3,071t, from 3,436t in 2015
  • Total investment demand grew by 70% to 1,561t in FY 2016 from 919t in 2015
  • Global jewellery demand was down 15% at 2,042t, compared with 2,389t in 2015
  • Central bank demand was 384t, down 33% compared with 577t in 2015
  • Demand in the technology sector decreased by 3% to 322t from 332t in 2015
  • Total supply grew by 5% to 4,571t this year from 4,363t during 2015. This was largely driven by recycling, which increased 17% to 1,309t from 1,117t in 2015.

 Q4 2016 figures:

  • Overall demand was 994t, a fall of 11% compared with 1,123t in Q4 2015
  • Total consumer demand increased by 5% to 989t from 940t in Q4 2015
  • Total investment demand fell 21% to 174t this quarter compared with 220t last year
  • Global jewellery demand was down 5% at 622t, compared with 653t in Q4 2015
  • Central bank demand reached 114t this quarter, a fall of 32% from 169t in Q4 2015
  • Demand in the technology sector increased by 3% year-on-year, up to 84t compared with 82t during Q4 2015
  • Total supply fell by 4% to 1,036t this quarter from 1,081t during Q4 2015.  
  • Recycling increased by 5% to 250t during the fourth quarter, from 239t during Q4 last year.

The Gold Demand Trends Full Year 2016 report, which includes comprehensive data provided by Metals Focus, can be viewed at http://www.gold.org/supply-and-demand/gold-demand-trends and on our iOS and Android apps. Gold Demand Trends data can also be explored using our interactive charting tool http://www.gold.org/supply-and-demand/interactive-gold-market-charting.

Gold:Silver Ratio Moving In Silver’s Favor

My latest article on Seeking Alpha

Summary

When the gold price advances, silver tends to do even better in percentage terms.

The Gold:Silver Ratio (GSR) is a great indicator of silver price trends and in recent days it has fallen below 70 and is testing 69.

Hecla Mining remains our precious metals stock pick for the year. It is already up over 14% year to date and we are only one month in!

To read full article click on: http://seekingalpha.com/article/4040993-gold-silver-ratio-moving-silvers-favor

Gold moves over $1,200 without Shanghai. Silver advances too.

Gold Today –New York closed at $1,190.90 on the 30th January after closing at $1,190.90 on the 27th January. London opened at $1,1201.00 today.

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

         The $: € was weaker at $1.0711: €1 from $1.0696: €1 yesterday.

         The Dollar index was weaker at 100.34 from 100.55 yesterday. 

         The Yen was slightly stronger at 113.66:$1 from yesterday’s 114.86 against the dollar. 

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

         The Pound Sterling was weaker at $1.2502: £1 from yesterday’s $1.2545: £1.

 Yuan Gold Fix

 Shanghai is closed today until Friday for the Lunar New Year celebrations.

LBMA price setting:  The LBMA gold price was set today at $1,198.80 up from yesterday’s $1,189.85.  

The gold price in the euro was set lower at €1,119.85 after yesterday’s €1,115.34.

Ahead of the opening of New York the gold price was trading at $1,197.75 and in the euro at €1,118.71.  At the same time, the silver price was trading at $17.18. 

Silver Today –Silver closed at $17.15 at New York’s close yesterday against $17.12 on the 27th January. 

Price Drivers

On Monday in New York, there were purchases of gold into the Gold Trust of 0.60 of a tonne, still not enough to affect the gold price, which continued to rise after President Trump announced his Executive Order on Immigrants. There was no change in the holdings of the SPDR gold ETF, so we see the rise in the gold price over $1,200 as a rise that could easily be turned back. But there are only two more days to do that as Chinese demand returns on Friday. China continues to enjoy its Lunar New Year. We expect gold’s price action to be subdued until they return.

The furore over the President’s executive order looks to outsiders as somewhat chaotic with markets reacting seemingly to the emotions stirred up and not to economic realities. What amazes outsiders is that he won the Presidency on the policies he is enacting now. Did they think he was lying just to get votes then back off his policies? What is for sure is that he will continue to walk this road, so we expect the current tone of his Presidency to continue to be combative and upset the establishment. At this point in time, we would think that his actions will be gold neutral. Only when he announces his fiscal policies do we see it touching the U.S. gold world.

Gold ETFs – Friday, in New York, there were no sales or purchases of gold from or into the SPDR gold ETF (GLD) but there was a purchase of 0.60 of a tonne into the Gold Trust (IAU), leaving their respective holdings at 799.070 tonnes and 198.90 tonnes. 

Since January 4th 2016, 197.09 tonnes of gold has been added to the SPDR gold ETF and to the Gold Trust. 

 Julian D.W. Phillips GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

Moves afoot could bring gold confiscation closer

Gold Today –New York closed at $1,190.90 on the 27th January after closing at $1,189.10 on the 26th January. London opened at $1,192.00 today.

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

         The $: € was unchanged at $1.0696: €1 from $1.0696: €1 Friday.

         The Dollar index was slightly stronger at 100.55 from 100.50 Friday. 

         The Yen was slightly stronger at 114.86:$1 from Friday’s 114.99 against the dollar. 

         The Yuan was unchanged at 6.8772: $1, from 6.8772: $1, Friday. 

         The Pound Sterling was weaker at $1.2545: £1 from Friday’s $1.2565: £1.

 Yuan Gold Fix

Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    1    30

     2017    1    27

      2017    1    26

SHAU

SHAU

SHAU

/

/

/

/

/

/

$ equivalent 1oz @  $1: 6.8772

      $1: 6.8772

$1: 6.8755

  /

/

/

/

/

/

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 is closed today until Friday for the Lunar New Year celebrations.

LBMA price setting:  The LBMA gold price was set today at $1,189.85 up from Friday’s $1,184.20.  

The gold price in the euro was set lower at €1,115.34 after Friday’s €1,107.45.

Ahead of the opening of New York the gold price was trading at $1,191.00 and in the euro at €1,116.42.  At the same time, the silver price was trading at $17.09. 

Silver Today –Silver closed at $17.12 at New York’s close yesterday against $16.80 on the 26th January. 

Price Drivers

On Friday in New York, there were sales of gold from the Gold Trust of 0.45 of a tonne, not enough to affect the gold price, which rose on the first day of the Lunar New Year, much to our surprise, as we saw the day as opportune for the bears to strike. Instead, bullish positions on COMEX rose as did the price of gold.

With four more days of the absence from the market in Shanghai, it is clear that with prices pulling back now, when the Chinese do return we see them jumping in to get these prices.

There are proposals being put forward in the European Commission to further control transactions in cash. These are being put forward supposedly to control or prevent terrorism. A ‘by-product’ of such a proposal would be total control of everybody’s money through the banks. All these would then be under the watchful eyes of governments [this is part of “Big Brother is watching you”].

We must recognize that gold would be the next to come into that scheme of things, as it is, likewise, capable of being used  in the same way as cash. This brings the prospect of gold confiscation one step closer!  With such proposals now on the table, not only in smaller countries but in the E.U. itself one can no longer ignore the prospect of a future confiscation of your gold.

Gold ETFs – Friday, in New York, there were no sales or purchases of gold from or into the SPDR gold ETF but there was a sale of 0.45 of a tonne from the Gold Trust, leaving their respective holdings at 799.070 tonnes and 198.30 tonnes. 

Since January 4th 2016, 196.49tonnes of gold has been added to the SPDR gold ETF and to the Gold Trust. 

 Julian D.W. Phillips GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

Gold flows to China via Switzerland soar in December

The latest gold import and export figures into and out of Switzerland both showed huge increases in December with exports to China a particularly notable 158 tonnes compared with a rather small 30.6 tonnes in the previous month.  With gold flows into the Chinese mainland from Hong Kong also picking up in December this represents pre-Chinese New Year holiday demand and may also have been boosted by the lower gold prices prevailing in the final quarter of 2016.

Switzerland has always been a major conduit for gold flowing into stronger Eastern hands.  That into China for example stays there and doesn’t come out again.  The private Swiss gold refineries, Valcambi, Metalor, Pamp and Hereaus all specialise in re-refining gold scrap and 400 ounce good delivery gold bars into the smaller, mostly kilobar, sizes in demand in the Middle and Far East.

But most significant in the latest figures were the exports recorded to China of 158 tonnes – and given that China imports gold directly from a number of other sources too – this suggest a huge pick-up in Chinese demand at the end of a particularly weak year.  We have already pointed to a sharp fall in Shanghai Gold Exchange (SGE) gold withdrawals over the year (See:  2016 SGE gold withdrawals lowest for four years) which is symptomatic of the same overall reduction in gold demand in China over the full year, but whether the big rise in December imports from Switzerland is purely due to demand ahead of the Chinese New Year, or is gold price-related following the dip in US dollar bullion prices immediately following the US Independence Day holiday in July, is uncertain – but probably a combination of both.

bloomb-china-gold-imports-dec

The above graphic from bloomberg.com demonstrates the huge increase in Chinese gold imports from Switzerland in December.

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

SHAU

SHAU

SHAU

/

/

269.04

/

/

267.84

$ equivalent 1oz @  $1: 6.8772

      $1: 6.8755

$1: 6.8766

  /

/

$1,216.89

/

/

$1,211.46

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: GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

It Might Be Time to Grab the Commodities Bull by the Horns

By Frank Holmes – CEO and Chief Investment Officer, US Global Investors

B

Commodity investors have had to endure a dry spell for a while now, but those days are starting to look as if they might be behind us. We see encouraging signs that a bottom has been reached and a new commodities super-cycle has begun, as global manufacturing expansion and inflation are finally gathering steam following the financial crisis more than eight years ago.

As a group, commodities had their first positive year since 2010, ending 2016 up more than 11 percent, as measured by the Bloomberg Commodity Index.

commodities end positively for the first time in six years
click to enlarge

A large percentage of this growth occurred in the days following the U.S. election, suggesting the reflation trade is officially in motion, which should be supported in the coming weeks and months by President Donald Trump’s pro-growth policies.

Just this week, Trump signed executive orders to proceed with the controversial Keystone XL and Dakota Access pipelines, emphasizing that the steel to be used in their construction will be American-made. Following the announcement, stock in energy infrastructure company TransCanada, which is expected to resubmit plans for the pipeline after it was rejected by the Obama administration, immediately hit a new high, while shares of several steel companies traded up.

Between Election Day and Inauguration Day, the commodities index rose 5.4 percent, with double-digit growth in crude oil (up 17.1 percent), copper (10.5 percent) and iron ore (17.7 percent).

commodities up double digits since trump's election
click to enlarge

Of the 14 commodities that we track in our ever-popular Periodic Table of Commodity Returns—which has been updated for 2016 and is available for download—only two ended the year down: corn and wheat. All this, following the group’s worst annual slump since the 2008 financial crisis.

The Periodic Table of Commodity Returns

Investment Banks Turn Bullish on Commodities

Back in May, Citigroup was first to say that the worst was over for commodities, and in December it made the call that most raw materials were poised to “perform strongly” in 2017 on global fiscal stimulus and economic expansion.

Now, for the first time in four years, Goldman Sachs has recommended an overweight position in commodities, following reports that revenue from commodity trading at the world’s 12 biggest investment banks jumped 20-25 percent in the fourth quarter of 2016 compared to the same period in 2015.

As reported by Bloomberg, Goldman’s head of commodities research, Jeffrey Currie, drew attention to the “cyclical uptick in global economic activity,” which is “driving demand, not only for oil but all commodities.”

“U.S. and China are focal points where we’re seeing the uptick,” Currie continued, “but even the outlook for Europe is much more positive than what people would have thought six months to a year ago.”

Indeed, manufacturing activity continues to expand at a robust pace, with January’s preliminary purchasing managers’ index (PMI) for the U.S. and the eurozone registering an impressive 55.1 and 54.3, respectively. We won’t know China’s January PMI until next week, but in December it improved at its fastest pace in nearly four years. As I shared with you earlier this month, the global manufacturing PMI expanded for the fourth straight month in December, reaching its highest reading since February 2014. I’m optimistic that it will expand again in January.

Global Manufacturing Climbs to 34-Month High in December 2016
click to enlarge

Again, we closely monitor the PMI, as our research has shown that it can be used to anticipate the performance of commodities and energy three and six months out. It looks as if the world’s big banks have begun to acknowledge this correlation as well. With the health of global manufacturing trending up, we see commodities demand following suit in the coming months.

Number of Auto Sales Hits an All-Time High

Case in point: auto sales. Last year marked a new record high, with 88.1 million cars and light commercial vehicles driven off of car lots. That figure was up 4.8 percent from 2015.

Global Auto Sales Reached a New Record in 2016
click to enlarge

China was the standout, which increased sales 13 percent and saw 3.2 million new units sold. It should be noted, however, that sales were assisted by a 50 percent tax cut on smaller vehicles, which is no longer in place.

China sold a record number of automobiles in 2016
click to enlarge

But consider this: Here in the U.S., the average age of cars and light trucks continues to creep up and is now 11.6 years, as of January 2016, according to IHS Markit. Improvements in quality is the main reason for the increase.

Even so, these aging vehicles will need to be replaced in the next few years, meaning domestic auto sales should remain strong. This bodes well for platinum and palladium, both of which are used in the production of catalytic converters.

But what about electric cars, which have no need for catalytic converters since they’re emissions-free? As I’ve shared with you before, electric cars—the demand for which continues to climb—use three times more copper wiring than vehicles with a conventional internal combustion engine.

There’s always an opportunity if you know where to look!

Precious Metals v. Mining Stocks: What You Need to Know

By David Smith*

Most readers of this column own (or plan to own) physical precious metals – gold and silver, perhaps even some platinum or palladium. They may also own mining stocks.

But which category is “best”? It’s like asking, “What’s the most efficient exercise?” or “What’s the best fishing lure?” Truth be known, it’s really about what you wish to accomplish! Here is my considered opinion…

Precious Metals Offer Insurance First – Profit Second

One should strongly consider holding physical precious metals for “investment first, profit potential second.”

The primary function of “metals in hand” is to help offset the possible loss of purchasing power that inflation or a changing business/regulatory climate might visit on a person’s other asset classes, such as the broad stock market, real estate, collectibles, and certainly, bonds.

Gold-Silver Ring

“The One-Ring” – Gold and Silver

This last category appears to be ending a literal 30-year bull market, during which time interest rates declined (and bonds rose) to levels not seen in many decades.

(A change in the secular trend, to rising interest rates, would have severe ramifications for the value of bonds, whether or not they are held to maturity.)

A side advantage, common in India but not discussed in this country, is that gold and silver can be easily be “pawned” when a person might not have other options for a loan. Just like any item left in the pawn shop owner’s care, precious metals can be redeemed when the loan has been paid off.

Indians have a much more nuanced – and relaxed – view about metals’ ownership. Outlookindia.com takes the pulse about how its citizens deal with the idea of buying gold and silver, noting, “If you bought gold today and its price falls tomorrow, you don’t say, oh, wish I had not bought gold, I lost money. You just look at your gold and say, I have got 200 grams of gold. That’s it.”

Mining Stocks Are Speculations

Mining stocks are an entirely different “investment animal.” You’re buying shares in companies who explore for and/or produce precious and base metals. Miners have many inherent risks to overcome, which the metal held in your hand, by virtue of having being refined, has already put behind it.

A miner’s profit can be adversely affected by all sorts of variables – operational factors like oil prices, the cost of labor, local community support or lack thereof, government regulations, and even nationalization (theft) of a company’s assets – which often takes place without compensation to the owners, let alone shareholders. A tailings dam collapse or accidental worker deaths can also affect the share price. Over the years, several such companies have seen theirs drop from multiple dollars each, to a fraction of that… or to zero.

Miner

Some companies bill themselves as “pure silver producers.” The “purest” of these usually produce a fair amount of base metals – lead, copper and zinc – which are added to the profit mix to yield “equivalent silver ounces.” Even the best known examples may list 30-40% of their annual production in this non-silver category. A geologic fact is that silver veins tend to “pinch and swell,” causing ore head grades, and hence the company’s share price, to unexpectedly rise or fall.

A big argument for holding mining stocks is that because of their increased risk profile, they can be expected to gain at a greater percentage rate – perhaps several times as much – as do gold and silver. For a number of miners in 2016, that was certainly the case. Yet several of the best ones on the board also declined over 50% during last fall’s inevitable correction to the strong uptrend… which you may have noticed was not the case with the price of the metals they produced.

For much of the last 20 years, during which time, precious metals rose by multiples of their early bull market price, mining stocks as a group actually underperformed. So what’s the point of taking on additional risk and doing considerably more work, just to find that you could have made a single metals’ buy-and-hold decision – which performed better with less downside?

You should also answer these fundamental questions before deciding whether or not to include miners and metals in your investment mix. What are your financial goals? How much risk are you willing to take? How much time can you spend on the “care and maintenance” of your “garden” of stocks?

They can’t simply be purchased and placed in a drawer somewhere. Here are just a few of real-life, high-to-low ranges, stated in U.S. dollars, of share prices for several well-run, profitable miners during the cyclical bear market lasting from mid-2011 to late-2015 – $19 down to $7; $10.30 to $0.28; $43 to $5.38; $13 to $1; $36 fell to $3.30.

And did I mention that scores of other companies either reverse-split 20 (or 100):1… or simply went bankrupt?

BGMI v Gold

BGMI index vs. Gold

Why I Hold Mining Stocks and Why, Perhaps, You Should Not

Trading the mining sector is quite literally a job. I write reports, take mining tours, read hundreds of articles and evaluations on scores of companies – and trade mining stocks. But that’s my choice. It’s great when shares are rising to the sky, as was the case this past January to August. But it was NOT great when the bottom fell out into December.

I am willing to put up with these swings for the possibility of a few home runs, while often settling for base hits, along with the occasional “strike-out.” Do you have the temperament, are you willing to put in the research, can you handle the risk, do you want to give up a lot of the time you could spend doing something else?

Perhaps you can answer “yes” to these questions. If not, or the questions aren’t relevant to what you’re trying to accomplish, then you should seriously consider keeping decision-making about the metals, relevant to your needs and goals.

Instead buy physical gold, silver, and maybe some palladium rounds. Store them in a safe space. Then go out and golf, fish…or spend quality time with your family. In the process, we hope you can achieve what David Morgan wishes for the subscribers to his newsletter at themorganreport.com at the close of each and every issue he pens – “Health above wealth; Wisdom above knowledge.”

How Sound Money Principles Can Bolster Your Personal Finances

By Stefan Gleason*

Sound money principles can serve to help grow the economy and restrain government. The political class, however, doesn’t particularly want to restrain itself. Washington, D.C. is addicted to the easy money policies that have enabled $20 trillion in national debt accumulation and tens of trillions more in unfunded liabilities.

Rising Debt

Even with a new and unconventional GOP president who vows to take on waste and overregulation, the built in momentum of “mandatory” spending means the Trump budgets won’t be balanced. The debt will keep growing – and likely at a faster pace than the economy. Thus, political demand for the Federal Reserve’s artificially low interest rates and Treasury bond purchases will continue to be strong.

Short of a currency crisis that forces a monetary revolution, sound money reform efforts will have to proceed in baby steps.

Any fundamental proposed changes – such as tying the currency supply to gold and silver reserves – will encounter enormous resistance from Congress, the Federal Reserve, and its member banks. A metallic standard would also be roundly opposed by Wall Street, which benefits from the Fed’s artificial inflation of the financial sector.

You Don’t Have to Wait for the Politicians…

Even if the current monetary order proves too well entrenched to be upended within your lifetime, sound dollar principles can still be valuable to you and your family. Apply some of the timeless lessons of honest money to your personal finances, and you’ll avoid dangerous pitfalls while protecting and growing your wealth over time.

Unsustainable debt growth is a symptom of an unsound monetary system. Politicians, businesses, and consumers assume dollars will be worth less and less in the future, so they borrow more and more in the present.

It’s not entirely irrational on their part. Leveraging up works out as long as the underlying assets (the tax base, revenue streams, homes, etc.) continue to increase in nominal value as the currency depreciates. But asset booms can go bust, even within a secular inflationary trend.

Inflation

In the aftermath of the next financial meltdown, the Federal Reserve’s unlimited printing press may well bail out “too big to fail” financial institutions. Don’t count on it to bail out the little guy. Don’t count on rising inflation to bail out your debts, either.

Under a gold standard, the quantity of paper and digital currency units in circulation are limited by the amount of gold backing them. Don’t let your debts exceed your ability to back them with earnings and assets.

Inflation may be built into the monetary system, but which assets will get lifted by inflation over any given period, and which won’t, is a matter of speculation.

If You Own Debt-Financed Real Estate, You’re Hedging against a Falling Dollar

Unsound money makes leveraged speculation seem attractive. Low interest rates will tempt you to borrow and take on more risk than you otherwise would. Steady currency debasement (inflation) will punish you for saving depreciating cash entice you to “short” the dollar instead.

Most households already have a sizeable short position against the dollar via the mortgage on their home. But houses are not a form of liquid savings. Real estate can be a good long-term investment, but it can also be financial trap for those who get in over the heads or need to sell during a downturn in the local market.

There is no substitute for having actual money in your personal reserves. At the same time, it is absolutely necessary to diversify your savings out of depreciating dollars in order to avoid losing to inflation. That’s where hard money – physical gold and silver – come into play.

You may even find it useful to measure your wealth in terms of ounces of precious metal rather than in terms of dollars. The dollar isn’t a sound currency that keeps a constant value over time. It is a fiat currency that is explicitly intended (by the Federal Reserve) to go down in value every year.

The dollar is a poor long-term measuring stick for wealth. The real value of a dollar has shrunk by 97% over the past 100 years. Imagine if the units of measure on a yard stick shrank by 97% every 100 years – it would be nonsensical to speak of “yards” in the year you were born as if they represented the same length as they do in 2017!

An ideal measuring stick for wealth would have fixed values that don’t change over time.

Falling Dollar

That could be achieved with a metallic standard that grew the supply of redeemable currency directly in accordance with growth in the economy. Under the current monetary regime, gold and silver values are as variable from day to day as they are for any commodity.

Yet when you take a step back from the daily price moves and even cyclical bull and bear markets, the utility of gold as a standard of value becomes clear. An ounce of gold has roughly the same purchasing power in the economy today as it did 100 years ago.

Far from being a relic of the past, gold continues to serve a vital role in modern global banking and commerce. Central banks continue to accumulate gold as a reserve asset. Even if today’s central bankers don’t like the idea of being tethered to gold, they still appreciate the fact that gold is universally recognized as the ultimate money.

For the same reason, even if you continue to denominate your wealth in dollars, you should still build up your personal reserves of gold and silver. These precious metals each have a far longer history of being used as money than any fiat currency, and for good reason. When all else fails

Gold and Silver weakening on options, SGE closing and GLD sale

 

Gold Today –New York closed at $1,200.10 on the 25th January after closing at $1,209.90 on the 24th January. London opened at $1,197.85 today.

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

         The $: € was weaker at $1.0732: €1 from $1.0724: €1 yesterday.

         The Dollar index was weaker at 100.11 from 100.31 yesterday. 

         The Yen was weaker at 113.78:$1 from yesterday’s 113.69 against the dollar. 

         The Yuan was stronger at 6.8755: $1, from 6.8766: $1, yesterday. 

         The Pound Sterling was stronger at $1.2635: £1 from yesterday’s $1.2509: £1.

 Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    1    26

     2017    1    25

      2017    1    24

SHAU

SHAU

SHAU

/

269.04

270.41

/

267.84

269.70

$ equivalent 1oz @  $1: 6.8755

      $1: 6.8766

$1: 6.8541

  /

$1,216.89

$1,227.10

/

$1,211.46

$1,223.88

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 trading today around 266.80 Yuan or in dollars, at today’s exchange rate, $1,206.95. The dollar was weaker across the board, but only slightly against the Yuan.

We correct ourselves and inform you that today is the last trading day before the ‘Year of the Rooster’ celebrations, which begin tomorrow and end next Thursday. Business will continue next Friday, there.

This marks the exit of Chinese demand from the global gold market for the next week.

London opened on Thursday $4.00 lower than Shanghai was trading at today. Shanghai continues to drive prices but to the downside now.

LBMA price setting:  The LBMA gold price was set today at $1,191.55 down from yesterday’s $1,203.50.  

The gold price in the euro was set lower at €1,111.21 after yesterday’s €1,118.08 as the dollar weakened.

Ahead of the opening of New York the gold price was trading at $1,193.25 and in the euro at €1,112.59.  At the same time, the silver price was trading at $16.89. 

Silver Today –Silver closed at $16.99 at New York’s close yesterday against $16.99 on the 24th January. 

 Price Drivers

Yesterday in New York there was a very heavy sale of gold from the SPDR gold ETF of over 5 tonnes. The market in New York fell during New York’s day below $1,200 to $1,196 but recovered overnight to $1,200.

In Shanghai the gold price today fell back to the equivalent of $1,206, when allowing for the difference of quality of gold being priced. It coincided with the closing date for Options today and may have been sold to lower the ‘striking price’ of those options, which would be around $12 lower, favouring the ‘put’ option holders.

The sale has also coincided with the last day of business in Shanghai before the Chinese New Year holiday.

As we have said in our weekly newsletter before, “It will take substantial daily sales of gold from the SPDR gold ETF to hold the dollar gold price down.” We do not think this will happen in the days to come.

Nevertheless the forecast we made yesterday of “expectations are moving to see lower gold prices in the very short term” has come true.

We then expect Chinese demand to come to life after the holidays, particularly if the gold price is lower.

This is positive for gold.  

Gold ETFs – Yesterday, in New York, there were sales of 5.038 tonnes of gold from the SPDR gold ETF (GLD) but there were no purchases or sales into or from the Gold Trust (IAU), leaving their respective holdings at 799.070 tonnes and 198.75 tonnes.  This sale was sufficient to cause the fall in the gold price.

 Julian D.W. Phillips: GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance