Gold jumps on US missile strike

Gold Today –New York closed at $1,251.70 yesterday after closing at $1,256.10 Tuesday. London opened at $1,264.00 today. 

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

         The $: € was stronger at $1.0638 after yesterday’s $1.0664: €1.

         The Dollar index was stronger at 100.71 after yesterday’s 100.60

         The Yen was stronger at 110.65 after yesterday’s 110.77:$1. 

         The Yuan was slightly stronger at 6.8992 after yesterday’s 6.8995: $1. 

         The Pound Sterling was slightly weaker at $1.2465 after yesterday’s $1.2475: £1.

Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    4      7

     2017    4      6

     2017    4      5    

SHAU

SHAU

SHAU

/

280.38

280.13

/

280.42

280.13

$ equivalent 1oz @    $1: 6.8992

       $1: 6.8995

       $1: 6.8892

      

  /

$1,263.97

$1,264.24

/

$1,264.15

$1,264.28

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.]

 Gold was trading on the Shanghai Gold Exchange at RMB282.24 towards the close.

This translates into $1,267.41. New York is trading at a $15.71 discount to Shanghai and London opened at a $3.41 discount to Shanghai. The close in New York was before the missile strikes in Syria.

LBMA price setting:  The LBMA gold price was set today at $1,264.30 from yesterday’s $1,253.75.  

The gold price in the euro was set at €1,189.37 after yesterday’s €1,174.58.

Ahead of the opening of New York the gold price was trading at $1,262.70 and in the euro at €1,188.09. At the same time, the silver price was trading at $18.35. 

Silver Today –Silver closed at $18.23 yesterday after $18.30 at New York’s close Wednesday.

Price Drivers

Overnight, the U.S. struck Syria with cruise missiles on President Trump’s order. The global political situation has degenerated, at least for now, causing gold to jump through the 200-day average. Will this hold? At first glance, we would think not, as it is not a cause for war between Russia and the U.S. simply a punitive strike, in response to the use of chemical weapons in what is more than a civil war in Syria. It is, to us, a long term middle east wide religious war between Shia [Assad/Iran, etc] and Sunni [rebels/Saudis, etc] sides of Islam set to continue for the foreseeable future.

The initial market reaction is to see it as the beginning of another longer term U.S. operation in the Middle East, but we expect markets to calm down as they see it as a one-off strike. Gold and silver are likely to retreat as matters calm down, but how far?

However, if gold does hold at current levels today, over $1,260, then the 200-day average will prove to be support and prices likely to rise.

With the Jobs report out today in the U.S. we may see efforts to pull gold and silver prices back. The news that the U.S. economy is strong is discounted in the market, perhaps too much so. As the Fed warned of overvaluations in equity markets it is possible the Jobs report has no effect on gold and silver prices.

Thus today could be a volatile day for precious metals as there is a lot of emotional content right now.

Gold ETFs – Yesterday saw no purchases or sales into or from the SPDR gold ETF but purchases of 0.45 into the Gold Trust.  Their respective holdings are now at 836.765 tonnes and 200.26 tonnes. 

Julian D.W. Phillips 

 GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance