Gold price could weaken as Chinese New Year holiday kicks in

Gold Today –New York closed at $1,215.30 on the 23rd January after closing at $1,201.50 on the 20th January. London opened at $1,213.35 today.

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

         The $: € was weaker at $1.0752: €1 from $1.0730: €1 yesterday.

         The Dollar index was weaker at 100.20 from 100.42 yesterday. 

         The Yen was stronger at 113.24:$1 from yesterday’s 113.61 against the dollar. 

         The Yuan was stronger at 6.8534: $1, from 6.8541: $1, yesterday. 

         The Pound Sterling was stronger at $1.2482: £1 from yesterday’s $1.2452: £1.

 Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    1    24

     2017    1    23

      2017    1    20

SHAU

SHAU

SHAU

/

270.79

269.04

/

270.74

268.92

$ equivalent 1oz @  $1: 6.8541

      $1: 6.8546

$1: 6.8765

  /

$1,228.73

$1,216.91

/

$1,228.51

$1,216.37

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 just above 270 Yuan or in dollars, at today’s exchange rate, $1,226,15 having touched nearly 272 during the day. The dollar is only slightly weaker across the board, as well as against the Yuan.

New York, Monday, closed in line with gold prices in Shanghai earlier in the day, before New York opened. This is a first, as New York climbed up to Shanghai’s levels despite an over 2 tonne sell-off from the SPDR gold ETF.

London opened on Tuesday $8.00 lower than Shanghai was trading at today. Shanghai is, once again driving prices despite the stronger Yuan against the dollar. It demonstrates that gold is rising against all currencies today and in all gold markets.

Chinese New Year

This weekend sees the start of the Chinese New Year, so the current demand is particularly for that holiday, which will last a week. During that time the Shanghai Gold Exchange is likely to be quiet. Will this see a fall off in prices? It is likely that we will.

With India struggling to find the cash to buy gold still, India will not shore up the gap made next week. So it is likely we will see falling prices until the Chinese return.

LBMA price setting:  The LBMA gold price was set today at $1,213.30 down slightly from yesterday’s $1,213.75.  

The gold price in the euro was set lower at €1,129.39 after yesterday’s €1,134.35 as the dollar stabilized.

Ahead of the opening of New York the gold price was trading at $1,213.65 and in the euro at €1,129.61.  At the same time, the silver price was trading at $17.14. 

Silver Today –Silver closed at $17.18 at New York’s close yesterday from $17.07 on the 20th January. 

Price Drivers

Despite over 2 tonnes of sales of gold from the SPDR gold ETF yesterday, the gold price in New York rose. Of course, that sale would only be reported at the end of the day and if it was sold into the market, it would be sold into London, which did not move higher this morning in London. Nevertheless, the amount is not so large that it is a price mover, but after stuttering small purchases into the U.S. based gold ETF’s in the last fortnight this was the first sale seen since early January. It followed a purchase the business day before of 1.85 tonnes, so its impact would have to be muted.

President Trump is sticking to his election promises on the foreign policy front by cancelling the TPP trade deal. As we said yesterday, ‘He looks as though he will ensure a protectionist, introverted set of policies that will move away from the avuncular, globally dominant policies,” that we have been used to from the Second World War. This is not too dissimilar to the policies China has followed for the last two decades and we see the spectacular results in China. The emerging world will suffer, particularly those that relied on U.S. trade for their economic health. They will look for other avenues of capital and trade inflows.

We can see that happening right now as President Trump’s withdrawal of the U.S. from the TPP agreement presents an opportunity to China to move into its place, in that Agreement. With China having created such a power, so far, it is able to bring the other members under its influence. But China will only walk that road if China benefits independently of the U.S. – Sounds Trumpish, doesn’t it?

Gold ETFs – Monday, in New York, there were sales of 2.074 tonnes of gold out of the SPDR gold ETF but there were no purchases or sales into or from the Gold Trust, leaving their respective holdings at 807.071 tonnes and 198.75 tonnes. 

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

10 key statistics for China’s New Year

Happy Chinese New Year! 2016: Year of the Fire Monkey

For decades now, China has been the leading driver of global growth, consuming unfathomable amounts of raw materials and commodities.

Today, the Asian giant is undergoing dramatic changes, as its government deepens reforms and opens the country’s economy up to foreign investment. The size of its middle class is rapidly expanding in size, giving a huge boost to domestic consumption. And with the creation of the Asian Infrastructure Investment Bank (AIIB) and the renminbi’s inclusion in the International Monetary Fund’s (IMF) reserve currency, China’s role in global financial markets is growing in importance.

No one can deny that challenges lie ahead, but opportunities are still abundant.

With this in mind, I’ve put together 10 figures to know as China enters a new year.

9th

As the ninth animal in China’s 12-zodiac cycle, the monkey is considered confident, curious and a great problem-solver. But 2016 is also the year of the Fire Monkey, which adds a layer of strength and resilience.

2.9 Billion

It’s been called the world’s largest annual human migration. “Chunyun,” or the Spring Festival, refers to the period around the Chinese New Year when people travel by plane, train and automobile to visit friends and family. Between January 21 and March 3, nearly 3 billion trips will be made, exceeding the number of Chinese citizens. Close to 55 million of these trips are expected to be made by air.

Chinese Tourists will take 2.9 billion domestic trips during this year's spring festival - U.S. Global Investors

For the third straight year in 2015, China topped the list of international outbound travelers, with 120 million people heading abroad. Collectively, they spent $194 billion across the world.

6 Million

Not all destinations are within China’s borders, however. According to CTrip, a Chinese online travel service, Spring Festival tourists have booked a record 6 million outbound trips. As many as 100 different countries will be visited, with the farthest region being Antarctica.

180 Tonnes

A shaky stock market, depreciating renminbi and low global prices have spurred many Chinese consumers to turn to gold. Imports of the yellow metal are way up. Last month I wrote that 2015 was a blowout year, with China consuming more than 90 percent of the total annual global output of gold. In December, the country imported 180 tonnes from Switzerland alone, representing an 86 percent increase over December 2014. This news supports the trend we’ve been seeing of gold moving West to East.

The Great Tectonic Shift of Physical Gold From West to East

The precious metal is currently trading at a three-month high.

49.4

For the month of January, the Chinese government purchasing managers’ index (PMI) eased down from 49.7 in December to 49.4 in January, indicating further contraction in the country’s manufacturing sector. The reading remains below its three-month moving average. More easing from China’s central bank, not to mention liberalization of capital controls, could be forthcoming this year to stimulate growth and prop up commodities demand.

Chinese Manufacturing Sector Continues to Shrink
click to enlarge

$6.5 Trillion

Although manufacturing has cooled, domestic consumption in China is following a staggering upward trajectory. In 2015, total retail sales touched a record, surpassing 30 trillion renminbi, or about $4.2 trillion. By 2020, sales are expected to climb to $6.5 trillion, representing 50 percent growth in as little as five years. This growth will “roughly equal a market 1.3 times the size of Germany or the United Kingdom,” according to the World Economic Forum.

By 2020, Chinese Private Consumption Will have Grown $2.3 Trillion
click to enlarge

109 Million

One of the main reasons for this surge in consumption is the staggering expansion of the country’s middle class. In October, Credit Suisse reported that, for the first time, the size of China’s middle class had exceeded that of America’s middle class, 109 million to 92 million. As incomes rise, so too does demand for durable and luxury goods, vehicles, air travel, energy and more.

109 Million for the first time, the size of China's middle class has overtake the U.S., 109 million compared to 92 million.

But middle-income families aren’t the only ones growing in number. The World Economic Forum estimates that by 2020, upper-middle-income and affluent households will account for 30 percent of China’s urban households, up from only 7 percent in 2010.

$1.6 Trillion

China's e-commerce consumption Set to Grow Over 160% Between 2015 and 2020

Consumption has also benefited from the emergence of e-commerce. Not only are younger Chinese citizens spending more than ever before, they’re doing it more frequently, as e-commerce allows for convenient around-the-clock spending. Such sales could grow from $0.6 trillion today to a massive $1.6 trillion by 2020.

Mobile payments will continue to play a larger role as well. Purchases made on a smartphone or tablet are expected to make up three quarters of all e-commerce sales by 2020.

24.6 Million

With a population of more than 1.3 billion, China is the world’s largest automobile market. The country certainly retained the title last year, selling 24.6 million vehicles, an increase of 4.7 percent over 2014. The U.S., by comparison, sold 17.2 million. According to China’s Ministry of Public Security, the Asian country added a staggering 33.74 million new drivers last year, which is good news for auto sales going forward.

6.5 Percent to 7 Percent

Many China bears point out that GDP growth in the Asian country has hit a snag. There’s no denying that its economy is in transition, evidenced by the government’s 2016 growth range of between 6.5 and 7 percent, a demotion from 2015’s target of 7 percent. But it’s important to acknowledge that China is still growing at an enviable rate.

Here’s one way to look at it, courtesy of Jim O’Neil, the commercial secretary to the British Treasury and the man who coined the acronym BRIC (Brazil, Russia, India, China). O’Neil calculates that even if China grows “only” 6.5 percent this year, the value is still equivalent to India growing 35 percent or the United Kingdom growing 22 percent.

For this reason and more, China remains a long-term growth story, and “there are many reasons to expect that in 10 or 15 years, China will be a greater, not a lesser, power than it is today,” says Stratfor Global Intelligence.

To all of my friends and readers both here and abroad, I wish you copious amounts of happiness, health and prosperity this Chinese New Year!

 

Gold touches $1200 in dramatic surge

Despite the Chinese market being closed for the Chinese New Year, the gold price has opened this week very strongly.  After a small dip overnight down to the mid $1,160s, it rapidly recovered any lost ground from Friday’s close, and then surged upwards through what many considered to be a key resistance level at $1,180.  At the time of writing it had pushed up to $1,196 and now commentators and analysts see it as heading to the $1,200 psychological level – a level it hasn’t see since June last year.  Indeed, as I write the gold price has surged from the high $1,170s to touching $1,200 in under an hour, before falling back to around $1,190.  Is this sign of the breakout the ardent gold bulls have been waiting for?

Sentiment towards gold appears to have made a complete sea change in the first five weeks of this year, not only in the world’s two biggest markets for physical gold, India and China, but now also in Europe and the USA, where the price tends to be set.  To an extent this is due to continuing serious nervousness in global equities markets.  For the past two to three years analysts have reckoned that gold had fallen out of favour as an asset class as far better returns were being made in the equities markets, but last year equities were largely flat, and ever since the U.S. Fed. commenced its so called interest rates normalisation programme, albeit with a tiny 25 basis points increase in mid-December. after a brief hiatus period equities have tanked and gold has been on the up.

Today, European equities markets opened lower, as did their U.S. counterparts, with the Dow falling back below 16,000 – it peaked last April at comfortably over 18,000.  Markets can move strongly in either direction, even in a day, but the overall trend since the beginning of the year has been sharply downwards.  The market pessimists have long been talking about a forthcoming equities crash, and now people are beginning to see this as a real possibility, and they are nervous.

Gold has thus been becoming a safe haven again.  We have seen purchases into the big gold ETFs heading towards erasing last years big liquidations in a matter of weeks.  Last week gold moved back up through its 200 day moving average, which reinforced other ‘buy’ signals, while panicky covering by some of the big holders of short gold positions will be adding to the surge.

Before gold investors get too euphoric though, it should be remembered that gold started last year really well too, with a similar surge, which took the then price up to around $1,296 by January 22nd – after opening the year at around the $1,170-1,180 mark (a rise of around 10% in only three weeks).  This year gold has risen so far by around 11% over five weeks – so a similar kind of increase.  Has the speed of the price increase been overdone?  Time will tell, and gold can be a somewhat fickle investment class, although long term it has tended to hold its value well.

Silver has not been immune to gold’s rise.  It was fixed this morning at the somewhat discredited London benchmark pricing system at $14.94 (although to be fair this was around the spot price at the time), but at the time of writing only a couple of hours later it had surged to $15.40 before falling back a few cents like its yellow sibling.