Shanghai leading gold higher?

 Gold Today –New York closed at $1,224.10 yesterday after closing at $1,219.30 yesterday. London opened at $1,228.55 today. 

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

         The $: € was slightly stronger at $1.0864 after yesterday’s $1.0870: €1.

         The Dollar index was slightly weaker at 99.64 after yesterday’s 99.65

         The Yen was stronger at 113.75 after yesterday’s 114.19:$1. 

         The Yuan was slightly stronger at 6.9047 after yesterday’s 6.9056: $1. 

         The Pound Sterling was weaker at $1.2875 after yesterday’s $1.2941: £1.

Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    5    12

     2017    5    11

     2017    5    10

SHAU

SHAU

SHAU

/

273.62

273.79

/

274.02

273.91

$ equivalent 1oz @    $1: 6.9047

       $1: 6.9040

       $1: 6.9064     

  /

$1,232.70

$1,233.03

/

$1,234.50

$1,233.57

Please note that the Shanghai Fixes are for 1 gm of gold. From the Middle East eastward metric measurements are used against 0.9999 quality gold. [Please note that the 0.5% difference in price can be accounted for by the higher quality of Shanghai’s gold on which their gold price is based over London’s ‘good delivery’ standard of 0.995.]

 The Shanghai Gold Exchange was trading at 275.60 towards the close today. This translates into $1,236.49. New York closed at a $17.39 discount to Shanghai’s close yesterday. London opened at a discount of $7.94 to Shanghai’s close today.

While New York rose slightly yesterday, Shanghai rose strongly and is leading the way for London.

On today’s moves, we would say Shanghai is dominating pricing power. As we said yesterday, Shanghai needed to stop falling before prices turn around. It has turned higher now.

LBMA price setting:  The LBMA gold price was set today at $1,227.90 from yesterday’s $1,221.00.  

The gold price in the euro was set at €1,129.21 after yesterday’s €1,123.48.

Ahead of the opening of New York the gold price was trading at $1,231.30 and in the euro at €1,128.60. At the same time, the silver price was trading at $16.45. 

Silver Today –Silver closed at $16.32 yesterday after $16.22 at New York’s close yesterday.

Price Drivers

Technically, it is time for gold to rise up into the pattern that it is forming. Its failure to breakdown further and the performance of the three gold markets across the world point higher today.

The latest figures on inflation in the U.S. has been hoped for and expected and is positive for the gold price. With negative interest rates here to stay for some time to come, the influence on gold is positive.

India

Demand for gold at the Akshaya Tritiya festival at the end of April was stronger than has been seen in the past confirming the problems with shortages of cash have dissipated. It is clear that Indian demand for gold is, once again, robust. Estimates for this year’s demand [because of positive forecasts for the monsoon as well] have gone as high as 1,000 tonnes. That’s official demand, excluding smuggled gold. In the past WGC estimates from years ago guesstimated smuggled gold was around 250 tonnes. It has certainly grown since then and will grow much more if the 5% GST tax is imposed on gold sales.

If one accepts this, China and India account for just over 80% of total supply [including scrap] of gold annually. This leaves very little for the rest of the world’s demand. If the rest of the world’s demand jumps, it will have a disproportionate impact on the gold price until that demand is pulled back by higher prices precipitating sales.

Gold ETFs – Yesterday once again saw no change in the SPDR gold ETF or the Gold Trust. Their holdings are now at 851.891 tonnes and at 201.69 tonnes respectively.

Julian D.W. Phillips 

 GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

Gold falls below support. Indian gold sees strength.

Gold Today –New York closed at $1,269.50 yesterday after closing at $1,263.80 Tuesday. London opened at $1,264.40 today. 

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

         The $: € was weaker at $1.0892 after yesterday’s $1.0877: €1.

         The Dollar index was weaker at 99.01 after yesterday’s 99.19

         The Yen was stronger at 111.30 after yesterday’s 111.47:$1. 

         The Yuan was weaker at 6.8940 after yesterday’s 6.8907: $1. 

         The Pound Sterling was stronger at $1.2900 after yesterday’s $1.2815: £1.

Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    4    27

     2017    4    26

     2017    4    25

SHAU

SHAU

SHAU

/

282.31

283.54

/

282.17

283.39

$ equivalent 1oz @    $1: 6.8940

       $1: 6.8907

       $1: 6.8862

      

  /

$1,274.30

$1,280.69

/

$1,273.67

$1,280.01

Please note that the Shanghai Fixes are for 1 gm of gold. From the Middle East eastward metric measurements are used against 0.9999 quality gold. [Please note that the 0.5% difference in price can be accounted for by the higher quality of Shanghai’s gold on which their gold price is based over London’s ‘good delivery’ standard of 0.995.]

 The Shanghai Gold Exchange was trading at 283.00 towards the close today. This translates into $1,272.42. New York closed at a $2.92 discount to Shanghai’s close yesterday. London opened at a discount of $8.02 to Shanghai’s close today.

While Shanghai’s gold prices continue to slip, New York took prices up to the level of Shanghai’s close yesterday [Take $5 off Shanghai prices in the table to see that, to account for the difference in the quality of gold being priced] but London pulled prices back at its opening.

LBMA price setting:  The LBMA gold price was set today at $1,264.30 from yesterday’s $1,264.95.  

The gold price in the euro was set at €1,159.38 after yesterday’s €1,162.96.

Ahead of the opening of New York the gold price was trading at $1,265.30 and in the euro at €1,162.53. At the same time, the silver price was trading at $17.43. 

Silver Today –Silver closed at $17.49 yesterday after $17.63 at New York’s close Tuesday. Silver is falling much faster than gold. As the silver price primarily reflects the U.S. silver market their price is certainly pointing downwards. If gold does not follow you can be sure that there will be a strong bounce soon. But if gold does break down, the silver price may well not fall as far.

Price Drivers

The gold price did not break down in New York yesterday but recovered to very close to Shanghai’s close yesterday.

There were no sales or purchases into or from the U.S. based gold ETFs, so there was no market reason for the rise and that rise dissipated in London.

The big event in the U.S. was the publication of the new U.S. Tax Code proposed by the Trump administration. While it was in line with his election promises, it has a long way to go before it is law. The market barely reacted to the event. There are doubts as to whether it will pay for itself as it relies on creating growth to generate additional income on which a similar amount of tax revenue will be achieved as is achieved today. Trump’s target is to also create ‘millions of jobs’ through such measures. As Bloomberg put it in an article yesterday, extra capital injections from richer companies could lead to loss of jobs as robots replace labor. This is happening and there are no proposals to find labor other permanent jobs.  Thus the President’s election promises are becoming more difficult to achieve by the day. That’s if they can be put into law.  

The second main event is that the NAFTA treaty will not be scrapped, but renegotiated. The election promises of scrapping it would have destroyed potentially millions of jobs, so Trump is having to be more pragmatic by the day. Such is reality.

The impact on the gold price was neutral. It was the weaker dollar that boosted gold in the U.S. slightly. But even there, the gold price has been slipping with a weak dollar the opposite of its usual behavior.

India

Akshaya Tritiya happens tomorrow in India. The market in India expects around 20-30% increase in demand during Akshaya Tritiya, compared to last year. This is because it is happening in the wedding season. It is clear that the new Rupee notes are now sufficient to completely replace the old notes. Add to that the stronger Rupee that has lowered the gold price to bargain prices for Indian buyers, in Rupees.

It may also be that the proposed 3% GST tax will bring forward more buying. What’s for sure is that the smugglers will be delighted with such a new tax, taking their potential income to double figures then. We have no doubt that in India smugglers now supply a major portion of gold supply.

Gold ETFs – Yesterday saw no sales or purchases in the two major U.S. gold ETFs after a sale of 5.921 tonnes out of the SPDR gold ETF (GLD) a day earlier but no change in the iShares Gold Trust (IAU). Their holdings are now at 854.25 tonnes and at 204.36 tonnes respectively.

Since January 6th 2017 47.20 tonnes have been added to the SPDR gold ETF and the Gold Trust.

Julian D.W. Phillips 

 GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

‘Solid’ gold at below $1200 denotes positive tone

Gold recovered to day back above $1200 despite dollar strength.  Julian Phillips’ look at the gold and silver markets and price drivers.

New York closed yesterday at $1,195.10 down $8.10. Asia left it there but London quickly lifted it up to $1,203.40. The LBMA Gold price was set at $1,201.90 up $5.90 on yesterday’s level. The euro equivalent stood at €1,132.59 up €18.22 reflecting the rising dollar. Ahead of New York’s opening, gold was trading higher in London at $1,203.30 and in the euro at €1,134.65.

The silver price closed at $16.20 down 32 cents yesterday. Ahead of New York’s opening it had recovered and was trading at $16.53.  The silver price is telling us that gold will fall shortly. But at the end of the day silver will continue to go wherever gold will lead it.

The euro is hitting new lows at $1.0595 in London’s morning while the gold price rose, showing that gold did not move on currency adjustments, as it did yesterday. We note that gold is rising in the dollar, the strongest currency in the world at present. Apart from the dollar strengthening across the board [the dollar index is at 99.31 up from 97.24 last Friday] and influencing gold on quiet days, it is clear that demand for gold is solid below $1,200. Overall there is now a positive tone in the gold market. It is only now reflecting in the silver market though.

There were purchases of 2.985 tonnes of gold into the SPDR gold ETF but no change in the Gold Trust yesterday. The holdings of the SPDR gold ETF are at 736.044 tonnes and at 165.28 tonnes in the Gold Trust.

It surprised most people to see that Greece did pay the I.M.F. its due money. But the huge bills coming at Greece in the next few weeks may be another story. We are puzzled at the almost blithe confidence on the Greek Prime and Finance ministers faces when they appear in the media. They must know something we don’t? They remain convinced that they will be given a deal by the E.U. or are certain on the way forward. What will that deal do to the euro? Markets are betting it will rise, just as they believe that it will fall, if they don’t. We have a contrary view on that.

In under a fortnight an important gold buying festival of Akshaya Tritiya starts in India. In the run-up to this we expect Indian gold demand to be strong.

In China yesterday it was a quiet day for gold, but this does not change the picture of ongoing and slowly rising demand for gold from there.

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