Digesting BoE inaction – Gold and silver marked down

Gold TodayGold closed in New York at $1,333.80 on Thursday after Wednesday’s close at $1,332.20.  In Asia the gold price held similar levels to New York.  

  • The $: € fell to $1.1135 down from $1.1096.
  • The dollar index fell to 96.07 from 96.32 Thursday.
  • The Yen was weaker at 106.00 from Thursday’s 105.44 against the dollar.
  • The Yuan was slightly weaker at 6.6825 from 6.6855 Thursday.
  • The Pound Sterling was stronger at $1.3352 down from Thursday’s $1.3225 reacting to the mistake in expecting more easing now.

Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
2016  07  15

2016  07  14

SHAU

SHAU

285.95

288.94

286.62

287.60

Dollar equivalent @ $1: 6.6825

$1: 6.6855

$1,330.94

$1,344.26

$1,334.06

$1,338.02

The Chinese gold market followed New York yesterday as the Yuan picked up slightly over yesterday’s exchange rate. All global markets were surprised by the Bank of England’s inaction, despite the indication that if the U.K. economy slowed down between now and August, easing action would be taken. This left the markets in the same position as the Bank of England, waiting for post-Brexit data.

The attempt to break the gold price down further in New York, with yesterday’s over 2 tonnes sale of gold, continued, but with less enthusiasm. The Technical picture continues to point downwards but appears to lack conviction.

As we forecast yesterday, “It is clear that if the BoE does announce easing we may well see a very strong upward move in the gold price. If not we expect to see the gold price either move slightly higher or sideways, as this has been discounted in the gold price now.”

LBMA price setting:  $1,330.50 up from Thursday 14th July’s $1,325.70.

The gold price in the euro was set at €1,196.12 up €3.41 from Thursday’s €1,192.71.

Ahead of the opening in New York the gold price stood at $1,334.2 and in the euro at €1,199.33.  

Silver Today –The silver price closed in New York at $20.25 on Thursday down from $20.38 Wednesday.  Ahead of New York’s opening the price was trading at $20.26.

Price Drivers

Global financial markets were stunned by the lack of action by the Bank of England yesterday, despite an intention to add more easing should the U.K. turn down in the period until the next meeting.

With hindsight we can see why they did this. We don’t think it was because they had done enough to date, but we do see that like global markets, post Brexit data on the way forward and impact of Brexit needs to be assimilated, before decisions are made. Pre-Brexit information cannot point the way forward!

That throws us back to the ‘big’ picture, once again. There we see a stabilizing China with growth picking up to 6.7% indicating it is becoming less dependent on the developed world and now walking its own road. We do expect, long-term, that China’s economic activity will separate itself from that of the developed world, while continuing to draw wealth and power from it. The developed world continues to have a falling growth prospect and a rising debt burden threatening to hurt it badly. [It is different in China where economic growth enables loans to be repaid. This warrants higher debt levels]. The overall economic picture promises increasingly heavy exchange rate pressures that favor gold and silver.

Gold ETFs – In New York on Thursday there were sales of 2.376 tonnes of gold from the SPDR gold ETF but we did see purchases into the Gold Trust of 0.36 of a tonne, leaving their holdings at 962.845 tonnes and at 214.90 tonnes respectively.

Since January 4th this year, the holdings of these two gold ETFs have risen by 380.154 tonnes.

Silver –Silver prices are chomping at the bit towards the upside. The reins and the bit are being held back by the gold price only.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance [Gold Storage geared to avoid its confiscation]

 

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Gold and silver prices marked down – waiting for the BoE

The dollar is slightly stronger today against the Yen and weaker against a recovering pound. But the moves are not significant, nor are expected to be so, as the world waits for Mark Carney of the Bank of England tomorrow. Some believe he will do nothing so as to encourage the pound to recover, feeling his focus will be on the internal situation in Britain and delay any further easing until August.

But with a recession on the cards for the U.K., and his failure to try to protect the pound’s exchange rate since Brexit, so far, we feel that it is unlikely that he will do nothing. He has before him a real chance of lowering the pound’s exchange rate even further, which in itself will act as an economic stimulus to the U.K. economy.  Hence, we see a further easing now.

As to the news on China’s claim to sovereignty over the Spratly Islands chain, we see this, for now, as gold and silver neutral.  Likewise, the new British Prime Minister’s appointment, it will speed up negotiations on Brexit, but again this is gold and silver neutral.

The prime drivers of the gold price remain macro-economic and monetary factors which will not change overnight. Daily news factors are unlikely to change the upward trend in the gold price.

Gold ETFs – In New York on Monday there were huge sales of 16.035 tonnes of gold from the SPDR gold ETF but purchases of 0.45 of a tonne into the Gold Trust. Their holdings remain at 965.221 tonnes and at 214.54 tonnes in the SPDR gold ETF and Gold Trust respectively.

The sale of 16.035 tonnes was a massive number and precipitated the fall in the New York COMEX gold market. The timing and size of the sale is an extraordinary statement that was more than just a future view of the gold market on Friday, after the BoE actions. It appears to us to be an attempt to force the gold market lower at a time when gold dealing was sparse in New York.  Instead of shoving the market lower, Shanghai turned the price around and took it higher.

There may be another attempt to push prices down today in New York, but we expect London and Shanghai to take the same neutral stance in the gold market.

Since January 4th this year, the holdings of these two gold ETFs have risen by 382.17 tonnes.

Silver –Silver prices are keen to go higher but remain slightly restrained by lower gold prices. If gold does move higher we expect silver prices to spring higher.

Gold TodayGold closed in New York at $1,332.20 on Tuesday after Monday’s close at $1,354.60.  In Asia the gold price also fell further as you can see below  

  • The $: € fell to $1.1051 up from $1.1100.
  • The dollar index rose to 96.53 from 96.12 Tuesday.
  • The Yen was weaker at 104.32 from Tuesday’s 103.44 against the dollar.
  • The Yuan was slightly weaker at 6.6859 from 6.6859 Tuesday.
  • The Pound Sterling was stronger at $1.3271 up from Tuesday’s $1.3158 but waiting for Governor Carney tomorrow when we expect the BoE to add further easing of interest rates!

Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
2016  07  13

2016  07  12

SHAU

SHAU

286.90

292.05

288.16

291.86

Dollar equivalent @ $1: 6.6845

$1: 6.6859

$1,334.97

$1,358.65

$1,340.83

$1,357.76

The Chinese gold market followed New York down, but then turned it up at China’s morning Fix taking it higher during their day to set the pace for London’s morning.

The attempt to break the gold price down in New York with the very large physical gold sale worked to some extent, but Shanghai then ignored the sale as demand came in at the lower prices. Certainly, Shanghai took the reins in the last day against the will of New York. We will watch today to see who exerts dominant pricing power?

LBMA am price setting:  $1,340.25 down from Tuesday 13th July’s $1,352.85.

The gold price in the euro was set at €1,210.27 down €8.51 from Tuesday’s €1,218.78. The afternoon price was set at $1,342.75 and in the euro at €1,211.03.

Silver Today –The silver price closed in New York at $20.09 on Tuesday down from $20.29 Monday.  Ahead of New York’s opening the price was trading at $20.40 but has slipped a little to $20.20.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance [Gold Storage geared to avoid its confiscation]