Sharp markdown in gold price as European and US tensions ease

 Gold Today –New York closed at $1,293.20 yesterday after closing at $1,293.80 Tuesday. London opened at $1,284.00 today. 

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

         The $: € was slightly stronger at $1.1232 after yesterday’s $1.1254: €1.

         The Dollar index was stronger at 96.89 after yesterday’s 96.73

         The Yen was weaker at 110.07 after yesterday’s 109.30:$1. 

         The Yuan was slightly weaker at 6.7954 after yesterday’s 6.7931: $1. 

         The Pound Sterling was stronger at $1.2941 after yesterday’s $1.2898: £1.

Yuan Gold Fix
Trade Date     Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    6    8

     2017    6    7

     2017    6    6

SHAU

SHAU

SHAU

 

 

283.66

282.37

 

Trading at 283.50

283.67

282.97

 

$ equivalent 1oz at 0.995 fineness

@    $1: 6.7954

       $1: 6.7931

       $1: 6.7954     

 

   

 

$1,293.79

$1,287.45

 

Trading at $1,292.62

$1,293.84

$1,290.19

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.]

 New York and Shanghai stayed at the same level yesterday and this morning. London opened $9.20 lower. We see London preparing for sales of gold by marking prices down ahead of trading. With the geo-political and financial events taking place today in the U.K. and E.U  the market is pausing waiting for clarity going forward.

Silver Today –Silver closed at $17.62 yesterday after $17.69 at New York’s close Tuesday.

LBMA price setting:  The LBMA gold price was set today at $1,284.80 from yesterday’s $1,292.70.  The gold price in the euro was set at €1,143.37 after yesterday’s €1,151.01.

Ahead of the opening of New York the gold price was trading at $1,284.75 and in the euro at €1,143.17. At the same time, the silver price was trading at $17.63. 

Price Drivers

British Elections happen today. As we said yesterday, “With the discussions around the size of the conservative majority it appears to us that the result will not affect the gold price.”

Draghi and the E.U.

Growth in the Eurozone is now clearly evident, but inflation is falling. As we said yesterday, Draghi, who has repeatedly said that policy makers must be convinced that inflation can rise toward 2% on its own, before removing monetary stimulus, may well make a point of this, but will, it seems only change his language in the statement slightly confirming this. This is positive for gold.

The Dollar

We do expect the euro to continue getting stronger against the U.S. dollar. Today the $ index is consolidating.

Today the indications are that Japan is moving towards ending their stimulus program. Whether this is because they deem it is no longer working or whether they have  beaten back deflation is yet to be confirmed. Certainly falling and low inflation world-wide is indicating such battles have not been won.

Comey Testimony

Former FBI Director James Comey is to testify today on whether President Trump tried to interfere with FBI investigation into possible links between then Security Adviser  Michael Flynn and Russia.  Consensus was that Comey would not say anything too damaging to the Trump Administration and this consensus was a partial contributor to a sharp markdown in the gold price, along with profit taking and the stronger dollar. (Editor)

Gold ETFs – Yesterday, saw purchases of 9.764 tonnes of gold and with yesterday’s 4.61 tonnes of gold bought into the SPDR gold ETF, we have seen 14.93 tonnes of physical gold bought into U.S. based gold ETFs in the last two days. We saw 0.56 of a tonne bought into the Gold Trust. Their holdings are now at 864.927 tonnes and, at 205.56 tonnes respectively.

U.S. buyers are strong buyers of physical gold now although this may not continue if today’s gold price downturn lasts.

Since January 6th 2017 58.693 tonnes have been added to the SPDR gold ETF and the Gold Trust. This is an approximately 30% increase in the last two days!

 Julian D.W. Phillips 

 GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

 

Trump Turmoil Grows, Prompting Flight to Safety

By Clint Siegner*

Donald Trump has been dogged by efforts to undermine his presidency since winning the election in November. Deep State operators and political partisans have been working around the clock to hang a scandal around the president’s neck large enough to ruin him.

If markets are any indication, they got some help last week from former FBI director James Comey. Comey’s leaked memo asserting the president tried to interfere with the investigation of Michael Flynn, the former National Security Advisor, prompted a selloff in stocks and a boost in precious metals.

James Comey Firing

Drama around former FBI Director Comey
may trigger Trump’s impeachment.

Democratic Congressman Al Green became the first in Congress to actually call for impeaching the president on the House floor. While there have certainly been plenty of people making the suggestion more informally, Trump’s opponents hadn’t gotten a lot of traction.

Now may be the time to start taking the impeachment threat more seriously.

There are signs that even some Republicans could support the effort. Representative Justin Amash from Michigan told reporters on Wednesday that if Comey’s memo is accurate, it provides grounds for impeachment. He trusts the former FBI director more than Trump.

Meanwhile, there is little reason to expect other prominent Republicans who have often voiced opposition to Trump, such as Paul Ryan, Mitch McConnell and John McCain, will fight very hard to protect the president.

To be fair, Trump has done plenty to weaken support amongst his own base. Many perceive him to be filling, not draining, the swamp by appointing a number of bankers and other insiders to key positions. His posture has been much more conciliatory than expected toward Hillary Clinton and other corrupt figures.

The president also appears anxious to compromise on key promises such as avoiding further entanglement in the Middle East, repealing Obamacare, and building a border wall.

PredictIt, a prediction market where participants can effectively wager on political outcomes, shows the odds of Trump being impeached moving significantly higher.

2017 Trump Impeachment Odds

It’s strange that markets, particularly for stocks, continue pricing in the eventual implementation of Trump’s economic agenda. The persistent controversy and the lack of cooperation from Congressional Republicans should have put a dent in investor optimism already.

In any event, traders are suddenly more anxious regarding what comes next. The president may survive this latest assault, but his opposition has proven committed to keep trying. There is a growing chance they will eventually succeed.

The escalating attacks make Trump likely to respond by going after Democrats, ratcheting up the turmoil even further. There is no shortage of fodder. Last week, for example, new evidence emerged that murdered DNC staffer Seth Rich, not the Russians, was behind leaks of DNC emails. The development drove further speculation that high ranking Democrats had Rich murdered for the transgression.

There is also a chance Trump will resort to the favored tactic of governments everywhere for boosting support and deflecting controversy – launch a war.

Trump is not known for any ability to quietly de-escalate. The drama in Washington is likely to keep on rising, and precious metals markets may be starting to reflect that.

Resolution point for gold

 Gold Today –New York closed at $1,219.30 yesterday after closing at $1,219.80 Tuesday. London opened at $1,222.00 again, today. 

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

         The $: € was slightly weaker at $1.0870 after yesterday’s $1.0872: €1.

         The Dollar index was slightly stronger at 99.65 after yesterday’s 99.43

         The Yen was weaker at 114.19 after yesterday’s 113.95:$1. 

         The Yuan was slightly weaker at 6.9056 after yesterday’s 6.9040: $1. 

         The Pound Sterling was weaker at $1.2941 after yesterday’s $1.2969: £1.

Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    5    11

     2017    5    10

     2017    5    9

SHAU

SHAU

SHAU

/

273.79

275.04

/

273.91

274.59

$ equivalent 1oz @    $1: 6.9040

       $1: 6.9064

       $1: 6.9035

      

  /

$1,233.03

$1,238.66

/

$1,233.57

$1,236.64

 

The Shanghai Gold Exchange was trading at 274.00 towards the close today. This translates into $1,229.12. New York closed at a $14.82 discount to Shanghai’s close yesterday. London opened at a discount of $7.12 to Shanghai’s close today.

With China continuing to see a slowly falling gold price, New York and London have stopped falling [for now?] seeing prices sitting on support around $1,220. It is clear that gold prices in Shanghai have to stop falling if we are to see gold prices turn around.

We need a clear move in gold prices to see where pricing power lies in the gold world.

LBMA price setting:  The LBMA gold price was set this am at $1,221.00 from yesterday’s $1,222.95.  

The gold price in the euro was set at €1,123.48 after yesterday’s €1,125.02.

Ahead of the opening of New York the gold price was trading at $1,223.65 and in the euro at €1,126.91. At the same time, the silver price was trading at $16.32. 

Silver Today –Silver closed at $16.22 yesterday after $16.15 at New York’s close yesterday.

 Price Drivers

We are seeing the influence of falling gold prices in Shanghai on New York and London, as we commented above, but New York prices are holding on despite no gold ETF demand. This demand has been responsible for U.S. gold prices rising. Until we see the strong move, we expect [either way], we cannot clearly see the way forward. We are at one of those junctures we call a ‘point of resolution’.

When all markets see less and less volatility it does mean that demand and supply have come into balance. Once that happens, it takes a relatively small sale or purchase to trigger a strong move. The situation is also ripe for a classic ‘bear raid’ one would think. But the growing influence of Shanghai and its policies against speculation has recently made such raids unsuccessful. So we sit and wait!

Events like the Comey firing do not move gold prices. What they do do, is to cause us to reflect on the state of President Trump’s administration and its ability to get things done as he promised. Trump’s promises of major tax cuts, combined with promises of infrastructure renewal, have not yet happened. While we expected these promises to take time to implement, the problems President Trump is hitting in his own party, as well as in government, point to enormous difficulty in getting these measures passed by Congress and the Senate, when he does try to get them through. Hence, we have to lower our expectations of “making America Great again”. Overall this is supportive of gold prices.

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