Gold and silver to hold their prices, and currencies fall against them.

Gold TodayGold closed in New York at $1,318.90 up from $1,257.50 on Friday a rise of $51.40.  Before the opening in London the gold price rose further to over $1,332, before pulling back to $1,325 after the market opened.

  • The $: € plunged lower on Monday morning to $1.1004 from [pre-Brexit] Thursday’s $1.1336.
  • The dollar index moved higher to 96.37 up from the pre-Brexit, 93.48.
  • The Yen continues to strengthen [101.70] after central bank indicated it may well intervene to weaken the Yen.
  • The Yuan continues to weaken to 6.65 respectively. The Yuan fix showed the Chinese authorities are taking pulling the Yuan down more in line with the euro than the dollar.
  • The dollar is strong on the Index so we do expect action to weaken the dollar even if it is just through swaps. The Fed expressed their worries at their last statement, so we doubt they will tolerate such strength.

Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
2016  06  27

2016  06  24

SHAU

SHAU

283.36

270.42

283.43

278.92

Dollar equivalent @ $1: 6.6412

$1: 6.6236

$1,325.41

$1,269.85

$1,327.42

$1,309.77

With the Yuan now being pulled down by the authorities in China,  we expect the Yuan price of gold to rise faster, as the Yuan falls.

Gold is rising against all currencies describing the real weakness of all currencies, even though the dollar is the least weak of them.

The positive Technical picture continues to promise higher prices.  

LBMA price setting:  $1,324.60 up from Friday 24th June’s $1,313.85.

The gold price in the euro was set at €1,200.96 up €14.00 from Friday’s €1,186.96.

Ahead of New York’s opening, the gold price was trading at $1,329.75 and in the euro at €1,208.53.  

Silver Today –The silver price closed in New York on Friday at $17.72 up from Thursday’s $17.33 a rise of 39 cents. Ahead of New York’s opening the silver price stood at $17.76.

Price Drivers

We are informed by the Chancellor of the Exchequer in Britain that he communicated with the G-7 leaders over the weekend and that their objective is to ‘calm’ markets and we have not seen any “gapping” [brutal sudden drops in values] yet.

His efforts will be focused on slowing down the process of divorce from the E.U.  in an attempt to minimize disruptions. All nations want calm, but all nations care for their own interests before those of others, so their efforts will not detract from their interests, leaving the fundamental problems of major structural proportions [much bigger than 2008] ahead of them. Let’s put it this way:

The huge earthquake has happened and tsunamis are on their way! Governments [who, to date, have not shown either the will or competence to resolve the problems that arose in 2008] are now building walls to minimize the impact of these.  They are on the defensive, without direction. Gold and silver will hold their prices, and currencies will fall against them.

Governments are braced for major banking crises with vast sums of newly printed money, which again will devalue those currencies against gold and silver!

The B.I.S. continues to warn of crises, this time pointing at the unsatisfactory way Sovereign debt is treated on balance sheets. In short, while the banks are well shored up with new capital and central banks are prepared to put new money into the monetary tide walls, the massive debt burden may well add to the tsunamis approaching. If governments are so concerned, so should we be!

Please note that all data that we receive from the global economy is pre-Brexit, so will not be indicative of the future state of global economies. Uncertainty rules the day!

Gold ETFs – On Thursday the holdings of the SPDR & gold Trust jumped 18.415 to a holding of 934.313 tonnes and the holdings of the Gold Trust remained the same at 201.91 tonnes.

Since January 4th this year, the holdings of these two gold ETFs have risen 339.437 tonnes.

Silver –Silver prices are ready to go full pelt, even against gold prices!

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

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Switzerland January gold exports:  Mainland China much higher than Hong Kong

The latest announcement on Swiss gold exports – for January – showed that for that month the small European nation, which provides a significant percentage of Asian physical gold demand from its refineries, exported far more gold to Mainland China than to Hong Kong.  42.1 tonnes as compared with 21.5 tonnes.  A chart from Nick Laird’s Sharelynx.com site detailing the latest gold export figures is shown below.

swissexp

So why is this significant?  For many years the vast majority of gold flowing to mainland China was imported first into Hong Kong and then to the mainland.  So much so that Hong Kong gold exports into the Chinese mainland were taken by much of the world’s media and analytical consultancies as being a proxy for total Chinese gold imports.  For the past few years, though, things have changed substantially with much more gold being imported directly, bypassing Hong Kong altogether.  Yet still media headlines trumpet falls and rises in the Hong Kong to China export figures as though these are still a proxy for total mainland China gold imports.  As the latest Swiss export figures show, this is most definitely no longer the case.

Hong Kong still remains an important conduit for gold imports to the Chinese mainland but its significance seems to be diminishing year on year which readers should bear in mind the next time a headline blares a fall in Hong Kong exports to China with the implication that this means that Chinese demand is falling accordingly.

Another interesting point from these Swiss figures is that over 90% of Swiss gold exports are flowing to Middle Eastern and Asian nations.  Switzerland’s own gold imports come in primarily from the UK – still the world’s major gold centre.  It flows via Switzerland for London good delivery gold bars to be re-refined and recast by the dominant Swiss gold refiners into the smaller bars and wafers which are mostly traded in the Middle East and Asia.

In January, Switzerland imported 166.9 tonnes of physical gold of which that from the UK totalled 61 tonnes – or 36.5%.  Interestingly the second largest source of gold flowing into Switzerland was from  Venezuela at 35.7 tonnes, thus confirming earlier reports that Venezuela, having only recently repatriated its gold to hold it within the nation, was now shipping significant quantities to Switzerland.  This is thought to be being used to mitigate its precarious debt position in a series of gold swap agreements via The Bank for International Settlements.

Gold Price: Waiting for Yellen

The New York gold price closed at $1,078.20 up from $1,071.70 on Friday’s close.  In Asia prices dropped to $1,074 before London took it down to $1,067 as the dollar index held close to Friday’s level of 97.90 at today’s 97.85 on the dollar Index. The euro is at $1.0955 almost the same as Friday’s $1.0956 against the dollar. The London a.m. LBMA gold price was set at $1,068.00 up from Friday’s $1,067.20 Friday.  In the euro the fixing was €974.05 up from yesterday’s $972.79. Ahead of New York’s opening, the gold price was trading at $1,068.65 and in the euro at €974.33.  

The silver price in New York closed at $13.95 down 16 cents. Ahead of New York’s opening the silver price stood at $13.80.

Price Drivers

Dealers and speculators are trying to second guess what the market’s reaction to the expected Fed rate hike on Wednesday will be and are reading the price in line with the Technical picture, as downwards. But such plays are high risk ones, for if the Fed does not affect the dollar exchange rate they will have to unwind their positions in the face of a market going the other way.

As you likely know, all financial markets across the globe are waiting with bated breath for the Fed announcement. When markets presume to know what is about to happen they discount that presumption. So the markets then go another way after that. If it is even slightly different to what is expected markets react strongly. So while we expect a quiet week until the announcement, thereafter expect volatility. One new provider [Bloomberg] even has a countdown clock for Janet Yellen’s speech. While she is a demure academic, it is more than likely that she will surprise us. –

Once again, we saw no sales from the SPDR gold ETF and nothing from the Gold Trust, on Friday. The holdings of the two gold ETFs, the SPDR gold ETF and the Gold Trust remain at 634.63 tonnes in the SPDR gold ETF and at 156.32 tonnes down from 157.07 tonnes in the Gold Trust. These sales would have had no impact on the gold price and most probably were from investors reducing their exposure to higher risk on Wednesday.

When the Bank for International Settlements warned of the “uneasy calm” in global financial markets it touched a host of global problems that would be affected by an interest rate move in the U.S. What they meant too was that many of these problems are in themselves structural problems that have not been fixed by those concerned or cannot be fixed by them. So the ‘ripple effect’ will not just be a short term reaction to Wednesday’s announcement, even if calm returns after the initial reaction.  We see these ripples moving through into 2016 and likely changing the scene of world financial markets for more than next year. This will be positive for gold and silver.

The silver price will follow gold closely this week. –

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