Gold and silver see strong support above $1,300

Gold TodayGold closed in New York at $1,323.20 on Monday after Friday’s close at $1,321.10.  London opened at $1,321.

    • The $: € was at $1.1172 from $1.1187 Monday.
    • The dollar index was at 95.76 from 95.60 Monday.
    • The Yen was at 102.37 from Monday’s 102.14 against the dollar.
    • The Yuan was the same at 6.680 from 6.680 Monday.

 

  • The Pound Sterling was weaker at $1.3072 from Monday’s $1.3107.

 

Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
2016  08  30

2016  08  29

SHAU

SHAU

284.81

283.32

284.56

283.68

Dollar equivalent @ $1: 6.680

$1: 6.680

$1,326.13

$1,319.20

$1,324.97

$1,320.87

As you can see Shanghai followed New York  but London reopened at Friday’s levels ignoring both New York and Shanghai. The dollar remains stronger.  

LBMA price setting:  There was no gold price setting on Monday as London was closed. On Tuesday the setting was at $1,318.85.

The gold price in the euro was set on Tuesday at €1,180.71 up on Friday’s 1,173.20.

Ahead of the opening in New York the gold price was reported as trading at $1,319.00 and in the euro at €1,182.22.  The silver price is trading at $18.77 ahead of New York’s opening.

Silver Today –The silver price closed in New York at $18.84 Monday up from $18.64 Friday.  

Price Drivers

What gold investors should not take their eyes off is the price of gold in other currencies as these are important to the real value of gold.

  • For instance the Chinese Yuan continues to sink against the U.S. dollar, so we are now seeing Yuan gold prices rise.
  • The Pound Sterling continues to fall against the dollar, so U.K. gold prices are rising.
  • In the U.S. Dollar the gold prices are sitting at their lower levels after the surge in the dollar exchange rate against all other currencies.
  • In Australia the falling Aussie dollar has made their gold mines profitable.
  • In South Africa the gold miners’ incomes suffered when ‘yield tourists’ turned to the Rand with its high interest rates. But as is South Africa’s unique political myopia, the resurgence of the South African police’s attack on the Minister of Finance is sending the Rand down from R13.3 to R14.4 against the U.S. dollar improving profitability to that extent.

Likewise gold owners are using gold to hedge against their own currencies within their countries. So gold is functioning well in measuring the value of currencies.

Please note that the moves in the last few days in the gold price have seen barely any physical action, so prices were simply adjustments to changes in exchange rates. In this way, gold is acting as a measure of value inside countries and not simply in comparison to its price in other currencies. It is a real defense against your own currency.

With the palpable negative view of a stronger U.S. dollar by the Fed and Treasury in the U.S. where will gold go now?

It is then that physical demand [a measure of confidence in currencies overall] adjusts the value of gold in all currencies.

Gold ETFs – In New York yesterday there was no change in the SPDR gold ETF but a purchase of 0.54 of a tonne into the Gold Trust. This left their respective holdings at 956.588 tonnes and 225.44 tonnes.

Silver – The silver price is moving higher at $18.7 at London’s opening and is doing so while gold’s moves looked like they may continue to go down. Once again we are seeing greater vigor in the silver price on the upside just as it demonstrated vigor when falling down from over $20. The fundamentals of gold are weighed in favor of an upside move back to that level, so now we wait to see what New York will do with the silver price.      

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

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Brexit ‘ill wind’ great for Aussie gold miners – and others too

As the saying goes, ‘It’s an ill wind that blows nobody any good’ and the decision by the British electorate to vote to leave the EU in yesterday’s referendum cerainly seems to be working in favour of Australian gold miners.  A combination of a fall in the Australian dollar’s parity with its US counterpart together with the rising US dollar gold price means that the Australian domestic gold price in its own currency, in which most of its costs are incurred, has hit a new record.

According to specialist consultancy, Surbiton Associates, the leave vote pushed the Australian dollar gold price as high as A$1,830 per in early afternoon Friday trading in Sydney.  The previous Australian dollar record of A$1,806.50 per ounce was set on 22 August 2011. This occurred when the US dollar gold price stood at US$1,877.50 an ounce and the Australian dollar was worth 104 US cents.

“We have been following the US dollar gold price and the US:Australian dollar exchange rate changes closely all day,” said Dr Sandra Close, a Surbiton director. ”Things are moving so fast that it is hard to keep up.”

Surbiton goes on to note that gold prices rose from the opening bell in Sydney this morning. After fluctuations in response to the early voting results, prices began rising steeply in afternoon trading. The main driver behind the rise in the US dollar gold price is the uncertainty that is emerging that would follow Britain’s departure from the EU and whether other countries in the EU might to follow Britain’s example.

“One thing I have learned over time is that the gold market is full of surprises,” Dr Close said. “Trying to forecast gold prices, or the price of any commodity, is a futile exercise – after all, you simply cannot predict the future.”

Australia is the world’s second largest gold producing country behind China. In 2015, Australia produced 285 tonnes of the yellow metal.

“Nothing is certain in the gold business,” said Dr Close whose company, Surbiton Associates is well-known for expertise on the gold industry. “We must always expect the unexpected.”

But it won’t just be Australian gold miners who are benefiting from the gold price surge and domestic currency falls.  Most major gold mining nations will also have seen the same effects with their own currencies falling against the US dollar, while the dollar gold price has jumped. While the Australian dollar is down around 3%, South Africa’s Rand is down nearly 5% for example.  The Canadian dollar down 2%, the Russian Ruble 2.5%.  Even the Chinese yuan, which is technically tied to the dollar, has fallen around 0.7%.  All these will have a positive impact on gold price production margins.

Gold and silver market morning: Currencies the key

The New York gold price closed at $1,050.70 down $22.60 from $1,073.30 on Thursday’s close.  In Asia prices rose  back to $1,057.00 before London held it around $1,056 and the dollar index rose to 98.99 up from 98.83 in the dollar Index. The euro fell back to $1.0821 down from yesterday’s $1.849 from Thursday’s level against the dollar. The London a.m. LBMA gold price was set at $1,055.25 down $10.60 from Thursday’s $1,065.85.  In the euro the fixing was €975.55 down from yesterday’s €982.26. Ahead of New York’s opening, the gold price was trading at $1,056.45 and in the euro at €976.52.  

The silver price in New York closed at $13.72 down 43 cents. Ahead of New York’s opening the silver price stood at $13.77.

Price Drivers

This is the second time gold has hit $1,050 and this after the euro weakened and the dollar strengthened, worldwide. Our focus is on the dollar and whether it will be allowed to get really strong, against the interests of the U.S. or whether it will be restrained to protect those interests. Gold’s way forward, at least in New York and London are contingent on this path.

We believe that gold and silver investors must understand and appreciate the importance of currency influences on gold and silver prices if they are to succeed in these markets.

After the Fed hiked rates and we saw the differential between Europe’s interest rates and those of the U.S. widen, it looked as though the bull market in the dollar had restarted and the further falls in the gold price appeared inevitable. But as we cautioned, it appeared that the moment the dollar index approached 100 it was turned back. Yesterday it did get to 99 but today we see it at 98.99 again. So the way forward of the dollar continues to be capped for now. We need to see the dollar Index over 100 before we believe the bull market in the dollar has resumed. This picture needs to clear before we see the way forward for gold and silver prices.

COMEX speculators appeared to have the day yesterday as gold fell heavily. There were sales of 4.464 tonnes of gold from the SPDR gold ETF yesterday but none from the Gold Trust. We think this amount of sales did support the heavy fall in the gold price, in the U.S. The holdings of the SPDR gold ETF remain at 630.166 tonnes and now at 155.87 tonnes in the Gold Trust. With COMEX still massively short the way forward still looks down.

We still need to see what follow through there will be in the week ahead, at least?

The silver price will follow gold and the euro again. Julian D.W. Phillips for the Gold & Silver Forecasters – www.silverforecaster.com and www.goldforecaster.com