Gold needs to break through 200 day MA to make move higher

 Gold Today –New York closed at $1,256.10 yesterday after closing at $1,256.30 Tuesday. London opened at $1,253.65 today. 

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

         The $: € was stronger at $1.0664 after yesterday’s $1.0670: €1.

         The Dollar index was slightly stronger at 100.60 after yesterday’s 100.57

         The Yen was slightly weaker at 110.77 after yesterday’s 110.70:$1. 

         The Yuan was weaker at 6.8995 after yesterday’s 6.8892: $1. 

         The Pound Sterling was stronger at $1.2475 after yesterday’s $1.2428: £1.

Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    4      6

     2017    4      5

     2017    4      4    

SHAU

SHAU

SHAU

/

280.13

/

/

280.03

/

$ equivalent 1oz @    $1: 6.8995

       $1: 6.8892

       $1: 6.8836

      

  /

$1,264.24

/

/

$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.]

 The Shanghai Gold Exchange reopened today and was trading at 280.6 towards the close.

This translates into $1,264.97. New York is trading at a $3.87 discount to Shanghai and London opened at a $6.32 discount to Shanghai.

LBMA price setting:  The LBMA gold price was set today at $1,253.75 from yesterday’s $1,252.50.  

The gold price in the euro was set at €1,174.58 after yesterday’s €1,173.96.

Ahead of the opening of New York the gold price was trading at $1,252.45 and in the euro at €1,173.81. At the same time, the silver price was trading at $18.23. 

Silver Today –Silver closed at $18.30 yesterday after $18.31 at New York’s close Tuesday.

Price Drivers

In the last day, the gold price broke down to $1,244 before recovering back above $1,250. So the support still holds at $1,250, but it has to break through the 200-day moving average of around $1,260 before rushing higher. So we should be ready for a gold price move either way today.

The Fed Minutes stated that, by traditional valuations, the equity markets in the U.S. are too high. So we watch the S&P 500 to see what impact that will have.  They also indicated that they may reduce the Fed’s Balance Sheet later in the year. While two interest rate hikes in the future are already priced in the monetary tightening is not. It may well result in the yield curve rising across its spectrum.

In Europe, Mario Draghi cautiously implied that the fear of inflation has passed and while risks remain to the downside he was more confident that growth across the E.U. economy is becoming positive. To us there are so many continuing risks in Europe that one needs to continue to question the future of the E.U. economy. What we did find somewhat disturbing in what he said, was that the more positive shape of the economy was due to two factors, monetary policy and the oil price fall. Oil market commentators are pointing to rising oil prices [but not back to triple digit levels] If oil prices do rise significantly, [which does seem unlikely as it will unleash more supplies] the fragile E.U. economies will suffer alongside economic recoveries across the globe.

Top of today’s events is the meeting between President’s Xi of China and President Trump. If President Trump’s election promises are to be a guide the meeting should end with potential confrontations and massive tariffs on Chinese imports into the U.S.   A sobering fact on this issue is that 73% of shoes sold in the U.S. are made in China [as an example of what could happen]. Or will we see a dampening of election ardor?

With the Obamacare repeal failing, what will happen to potential tax cuts? If Trump fails to get these through, we are back to the last 8 years of gridlock in government. Unless Trump has a major victory we cannot expect to see the vibrant growth Trump promised. As it is the dollar is expected to decline gently from now on. If his failure on Obamacare is reinforced with more failure, the dollar’s fall will accelerate against gold.

Gold ETFs – Yesterday saw no purchases or sales into or from the SPDR gold ETF but sales of 0.04 from the Gold Trust.  Their respective holdings are now at 836.765 tonnes and 199.81 tonnes. 

Julian D.W. Phillips 

 GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

Will the Gold Bull be Back after the Summer is Over

By Frank Holmes, CEO and Chief Investment Officer for US Global Investors

Donald Trump accepting the Republican nomination for president this week

Looking more Las Vegas casino than Oval Office, the stage Donald Trump delivered his nomination acceptance speech from Thursday was all gold, from the stairs to the podium, completely befitting of his showman-like style. Whether you support or oppose Trump, it’s time to face reality. This is really happening, and we should all brace ourselves for what will surely be one of America’s messiest, ugliest general election seasons.

Only time will tell which candidate will be triumphant in November, but in the meantime, one of the winners might very well be gold, which has traditionally attracted investors in times of political and economic uncertainty. In the United Kingdom, which voted one month ago to leave the European Union, gold dealers are seeing “unprecedented” demand, especially from first-time buyers. Some investors are reportedly even converting 40 to 50 percent of their net worth into bullion, though that’s not advisable. (I always suggest a 10 percent weighting, diversified in physical gold and gold mining stocks.) In Japan, where government bond yields have fallen below zero and faith in Abenomics is flagging, gold sales are soaring.

It’s not unreasonable to expect the same here in the U.S. between now and November (and beyond).

Strong U.S. Dollar and Treasury Yields Weighing on Gold

More so than the upcoming election, gold prices are being driven by U.S. dollar action, interest rates and low-to-negative bond yields around the world. (Between $11 trillion and $13 trillion worth of global sovereign debt currently carries a negative yield.) Right now the yellow metal is in correction mode on a strengthening dollar and rising two-year and 10-year Treasury yields, both of which share an inverse relationship with gold.

Gold Corrects on Rise of 10-Year Treasury Yield
click to enlarge

It’s also worth mentioning that the summer months have historically been among the weakest. By contrast, some of the highest gold returns of the year have occurred in September, when the Love Trade heats up in India in anticipation of Diwali and the wedding season.

Gold's Average Monthly Gains and Losses, 1975 - 2013
click to enlarge

For the past several trading days, gold demand had also been overshadowed by a hot equities market, with many stocks hitting 52-week highs. Both the S&P 500 Index and Dow Jones Industrial Average closed at all-time highs, twice in the latter’s case. The CNN Fear & Greed Index, which measures investor sentiment, is currently in “Extreme Greed” mode, at more than a two-year high.

Markets in Extreme Greed Mode

With gold taking a breather, now might be a good buying opportunity. Since 1970 there have been only four major gold bull markets, and the consensus among analysts right now is that we’re in the early stages of a new one, with end-of-year forecasts in the $1,400 an ounce range.

Learn more about what’s driving gold.

Rumors of Brexit’s Negative Impact Have Been Greatly Exaggerated

Despite gold’s correction, the metal got a boost last Thursday courtesy of Mario Draghi. The European Central Bank (ECB) president, as expected, announced that euro area interest rates and asset purchases would remain unchanged as economic ramifications of the Brexit referendum continue to be assessed.

Speaking of Brexit, Draghi noted that markets have met the volatility and uncertainty in the month following the U.K. referendum with “encouraging resilience.” Like many others, he had predicted that Brexit would dramatically stunt euro growth, but as we’ve already seen, such claims are overdone. In a note released last week, securities trading firm KCG wrote that June 24, the day following the British referendum, “was no repeat of August 24,” a reference to the “flash crash” that struck equities last summer and led to ETF mispricing.

Last week, the International Monetary Fund (IMF) trimmed 0.1 percent from its global economic growth forecast for the year, singling out Brexit fallout as the culprit. Curiously, though, the organization sees the U.K. growing faster than both Germany and France this year and next. This disconnect prompted U.K. Independence Party MP Douglas Carswell to label the IMF as “clowns” with “serious credibility problems.”

IMF Sees the U.K. Growing Faster Than Germany and France, Despite Brexit
click to enlarge

Following Draghi’s statement, gold prices immediately popped in Thursday morning trading, effectively hitting the pause button on the correction. On Friday, though, prices continued to slide, contributing to gold’s second straight week of losses.

The next hurdle to be cleared is a U.S. interest rate hike. Expectations that rates will go up in September have wobbled back and forth since Brexit, but in recent days, it’s been reported that Federal Reserve officials feel confident enough to raise them at least once before the end of the year. Gold will face additional pressure if rates are allowed to rise, but if the Fed chooses to stand pat, it could serve as another catalyst for a price surge.

 

Gold and silver still in consolidation mode

Gold TodayGold closed in New York at $1,319.30 on Wednesday after Tuesday’s close at $1,332.30.  

    • The $: € rose to $1.1029 up from $1.1002.
    • The dollar index fell to 97.00 from 97.12 Wednesday.
    • The Yen was slightly weaker at 107.02 from Wednesday’s 106.48 against the dollar.
    • The Yuan was stronger at 6.6742 from 6.6785 Wednesday.

 

  • The Pound Sterling was stronger at $1.3254 down from Wednesday’s $1.3178.

 

Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
2016  07  21

2016  07  20

SHAU

SHAU

282.87

/

282.96

/

Dollar equivalent @ $1: 6.6742

$1: 6.6770

$1,318.25

/

$1,318.67

/

Shanghai prices were in line with those of New York. Demand in China is rising with these lower prices. The media has labeled retail gold buyers as ‘Mammas’, pointing to the conservative older ladies who invest for long term financial security. These investors likely experienced the days of hyperinflation, or at least their own mothers related tales from those days.  

We find it extraordinary that the media likes to give demeaning names to those who distrust the global financial system and favor gold itself. We have found such investors just as intelligent and perceptive as traders who go for short term profits. Fortunately few precious metal investors are affected by such puerile name calling.

LBMA price setting:  $1,322.00 down from Wednesday 20th July’s $1,325.60.

The gold price in the euro was set at €1,200.08 down €4.00 from Wednesday’s €1,204.00.

Ahead of the opening in New York the gold price stood at $1,320.65 and in the euro at €1,198.63.  

Silver Today –The silver price closed in New York at $19.61 on Wednesday down from $20.00 on Tuesday.  Ahead of New York’s opening the price was trading at $19.42.

Price Drivers

With today’s European Central Bank meeting likely to have an effect on exchange rates and the gold price the prospect of more easing becomes important. But as with the Bank of Japan’s failure to move of late [saying ‘helicopter money’ is off the table], so the E.C.B. finds itself in a position where it is extremely limited in what it can do now or in the future. Lending is timid, so stimuli are not bearing fruit!

With the downward impact of Brexit on growth there are few relevant statistics that can be used to guide the E.C.B. Therefore we do not expect any action today [rates remain unchanged]. But we might see signals for more stimuli to be deployed when data is available for the next decision in September.

A major concern is how much further Mario Draghi of the E.C.B. can go [like the B. of J.] with a stimulus package that already includes a €1.7 trillion-euro ($1.9 trillion) asset-buying program increasingly constrained by ultra-low debt yields. A problem for policy makers is that although they’ve gone out of their way to spur credit expansion, the pick-up in lending remains timid. Under its own rules, the central bank can only buy debt with a yield at or above the deposit rate. Will they change rules in the future?

The E.U. is in uncharted territory. It is likely to castigate governmental inactivity on the growth front. This is gold & silver positive!

Gold ETFs – In New York on Wednesday there were no purchases into the SPDR gold ETF (GLD) or the Gold Trust (IAU), leaving their holdings at 965.221 tonnes and at 216.94 tonnes respectively.

Since January 4th this year, the holdings of these two gold ETFs have risen by 384.57 tonnes.

Silver –Silver prices continue to fall relative to gold.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance [Gold Storage geared to avoid its confiscation]

ECB stimulus: Gold and silver up, Euro still stays strong

Gold Today –Gold closed in New York at $1,265.50 on Wednesday, falling in London at the opening on Thursday morning.

The $: € moved from $1.1346 to $1.1340 overnight. The dollar index is standing at 93.89 up from 93.71.

LBMA price setting:  $1,258.35 up from Wednesday 8th June’ $1,252.40.

With the European Central Bank’s Mario Draghi beginning his next phase of monetary stimulus the concept of ‘helicopter money’ comes to fruition. A fear that, when one has deflation [and actions to stimulate inflation that fail point to heavy deflation] and such a stimulative policy going on, deflation accelerates because of the excessive supply of new money. A look at the Weimar Republic’s hyperinflation showed how the two joined forces to accelerate inflation. While we don’t think that today’s action will lead to hyperinflation, such policies do eventually result in considerable economic damage.  We believe that the road to that result has begun. Gold and silver prices are the natural beneficiaries as currency values decline heavily.

But the U.S. will act to prevent a strong dollar from resulting as this will hurt the recovery there. The weapons to keep the dollar strong against the euro will prove insufficient eventually, if ‘helicopter money’ issuance grows much more.

The gold price in the euro was set at €1,108.19 up from yesterday’s €1,101.69

Ahead of New York’s opening, the gold price was trading at $1,260.30 and in the euro at €1,113.78.

Silver Today –The silver price closed in New York at $17.05, up from Wednesday’s $16.40 a rise of 65 cents. Ahead of New York’s opening the silver price stood at $16.99.

Price Drivers

Mario Draghi made it abundantly clear that Monetary policy can do only so much and that structural reform must be undertaken to make monetary stimuli work well. The decision to buy Corporate Bonds, we feel, is going too far, as this will bring such yields down to zero and likely below into negative territory.

The evidence of QE both in Japan and the Eurozone to date has been disappointing in terms of delivering economic growth. There is a good case to say that at least it has staved off deflation, which will grow again, if stimulation is halted. Hence, such current stimulus is only a temporary solution, at best.

It is unlikely that there will be a synthesis of structural reform policies within the E.U. in the near or foreseeable future due to the structure of the E.U.  The bubbles that are being formed in the bond markets will burst, the moment interest rates are hiked.

Gold ETFs – On Wednesday the holdings of the SPDR & gold Trust stood still, once again, leaving the holdings of the SPDR at 881.145 and those of the Gold Trust at 196.90 tonnes.  There is media talk that gold is being bought. We can accept that this is so in the E.U. but U.S. demand is quiet as they analyse the way forward for the U.S. The gold price is rising

Silver –The silver price is going full pelt upwards. When gold pulls back silver pauses, when gold rises slightly silver will sprint ahead.

 

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

 

Gold volatile on ECB statement: SPDR gold buying recommences

Gold TodayGold closed in New York at $1,253.90 down from $1,261.40 Wednesday. In Asia this morning, it moved lower to $1,245 and then held there  in London until the LBMA price setting was set at $1,247.25 down from $1,258.25. The dollar index is slightly higher at 97.37 down from 97.17 on Tuesday.

The dollar is up against the euro at $1.0972 from $1.0963 on Wednesday. The gold price in the euro was set at €1,136.76 down from €1,143.83.

Ahead of New York’s opening, the gold price was trading at $1,248.00 and in the euro at €1,137.44.  

Silver Today –The silver price closed in New York at $15.31 down 5 cents.  Ahead of New York’s opening the silver price stood at $15.27.

Price Drivers

E.U. Today at 12.45 European time Draghi of the E.C.B. announced more stimulus measures, including a further lowering of interest rates and a boost to the amounts of QE. This has been discounted in the gold price already, with gold’s price threatening the Technical picture now.

But the broad opinion is now that his stimuli will have little impact. We are watching the exchange rate of the euro to the dollar in particular. We have said before that the U.S. does not want to see a strong dollar, particularly against the euro and will not want the dollar index over 100 or the euro lower than $1.05 to $1.07.  Gold slipped sharply on the news, but then picked up again even more strongly.

With governments in the E.U. having done too little, we expected Draghi to give them a mild castigation once more, but it is difficult to see if it is either possible or reasonable to expect him to do much more than he has. Hence we do expect to see the E.U. growth coming under pressure alongside the global economy, which is now in recession. Will we see the “derailment” the IMF has warned about? Standing back and gazing at the big picture, we see little reason to expect growth to be lifted no matter what Draghi does. If he disappoints then we may see the ‘derailment’ soon. The scene remains gold positive!

Gold ETFs There were purchases of 2.081 tonnes of gold into the SPDR gold ETF and purchases of 0.45 of a tonne into the Gold Trust yesterday. The holdings of the SPDR gold ETF are now at 792.820 tonnes and at 191.52 in the Gold Trust. While this was a reasonable level of buying into the two gold ETFs in the U.S. fears of what the market will do after Draghi’s announcement caused dealers to pull prices back.

Because, once again, physical sales were not a feature, we expect the gold price to be volatile today. If the euro does not fall strongly, we expect physical gold buyers to rush back in.

What is clear is that today will become a higher risk day than most.

Silver – The silver price remains on the back foot waiting for gold to go higher.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

Huge purchases into SPDR Gold Trust boost gold price

The New York gold price closed Monday at $1,129.20 up from $1,117.30 up $11.90. In Asia on Tuesday, it slipped to $1,126.35 ahead of London’s opening and then the LBMA set it at $1,123.60 up $1.60 with the dollar index down at 98.91 up from 99.40 Monday. The euro was up at $1.0918 down from $1.0863 against the dollar. The gold price in the euro was set at €1,029.13 down from €1,032.86. Ahead of New York’s opening, the gold price was trading at $1,125.15 and in the euro at €1,030.55.  

The silver price in New York closed at $14.35 up 8 cents at Monday’s close.  Ahead of New York’s opening, the silver price stood at $14.26.

Price Drivers

Monday saw a huge purchase of 12.196 tonnes into the SPDR gold ETF but none into the Gold Trust. The holdings of the SPDR gold ETF are now at 681.425 tonnes and at 166.45 tonnes in the Gold Trust. The huge purchase was responsible for gold’s rise yesterday and took the gold price back to resistance [small] at $1,130. The gold price picture remains technically positive.

Mario Draghi’s statement yesterday surprised us with its content. He is a brave central banker made so by his calls to E.U. governments to ‘step up’ and take action to lift prospects in the E.U. Governments have been sadly lacking in this area since the start of the credit crunch in 2007. They continue to be so passing the buck to central banks. Only so much can be achieved by central bank policies and without the support of governments, eventually central banks will fail to deliver. What he said yesterday is, to us, a signal that there is little more the E.C.B. can do and they should not be ‘blamed’ for a lack of solid economic growth. This raises the prospect of failing economic strength and disunity in the E.U.

If the U.S. sees a downturn for at least one quarter the E.U. will fare far worse. The E.U. wants a weaker euro to grasp at other nations exports, but is now unlikely to get it. The real answer lies in going to the consumer and boosting his income, job security and the value of his assets. Until this happens economic prospects in the developed world are unlikely to improve.

With the Yen falling again due to negative interest rates the likelihood of a ‘currency war’ is real. China will not tolerate being expected to hold its currency up [when it should fall] while Japan is taking advantage by intentionally lowering its exchange rate. This is ‘war’ and will meet with a reaction when it suits China. China has its own Q.E. program [a rose by any other name] and to hold the Yuan up, has de facto exchange controls in position, but may well formalize these shortly. This will be positive for gold in all currencies as the ‘war’ produces casualties.

Silver should hold its gains but will be more volatile than gold.

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

Don’t short the Euro – Draghi. Contrarian indicator?

Julian Phillips’ comments on the gold and silver markets today and factors driving the prices.

New York closed at $1,204.50 up $5.50 on Friday in NY. Asia took it up to $1,208 with London holding it there ahead of the LBMA Gold Price. The LBMA Gold price was set at $1,203.25 down $1.30. The euro equivalent stood at €1,118.83 up €7.11 against a weaker $: € rate of $1.0753 against yesterday’s $1.08355. Ahead of New York’s opening, gold was trading lower in London at $1,198.30 and in the euro at €1,115.68.

The silver price closed at $16.26 down 3 cents on Friday. Ahead of New York’s opening it was trading at $16.05.

The dollar began the week at $1.0781 and the dollar index at 97.52 showing a consolidating dollar more than a rising euro. Gold moved through its trading range, ahead of New York’s opening. Once again the gold price was essentially moved sideways ahead of New York’s opening confirming the tightness of the trading range implying a strong move anytime.

The E.C.B.’ Draghi told the media on Friday that it was pointless to short the euro. History shows that when a central banker attempts to stall the movement of a market trend, it is taken as an incentive to do the opposite. We don’t see why this time an exception should be made. As we said last week, “The factors that drove the dollar higher remain in position and the trend remains for a stronger dollar.” After all, the E.U. is gaining competitiveness enormously by the fall in its exchange rate.

To us the Greek situation is becoming more transparent as Greece said it won’t renege on election pledges to end austerity measures. The Deputy Prime Minister said, “We don’t budge from our red lines.” Now look at the laid back attitude of the Prime and Finance Ministers of Greece and we see them waiting for the E.U. to give a solution as they are unlikely to do more. Unless the E.U. offers more money Greece will be ejected from the euro. The tragedy will therefore grind on until June with the euro tending to weaken until then [we remind readers that  the euro trend is down while E.U.Q.E. continues through to Sept 2016].

There were purchases of 2.988 tonnes into the SPDR gold E.T.F. but no change in the Gold Trust on Friday. The holdings of the SPDR gold ETF are at 739.069 tonnes and at 165.28 tonnes in the Gold Trust.

From today onwards we expect Indian demand to subside as the festival season comes to an end.

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

 

Gold to move to role to reinforce currency credibility

Julian Phillips’ latest take on the global gold and silver markets and their monetary role.

Mario Draghi, who heads up the ECB, is doing what he says he would by launching QE in Europe. At Eur60 billion a month, until Sept 2016, this could leave room for more to come, if necessary. The euro will fall, much more as we see today.

He did water it down slightly by making national central banks do most of the work and carrying the risk. Only the governments of Europe can take it further. Draghi has now used up his arsenal of tools.  Sad to say, we do not see this creating economic growth over time in itself.

The oil price can help, as can the lower euro but with all currencies [except the dollar] ‘racing to the bottom’ how long will this do what it’s intended to? If economic stagnation continues to come closer, more money in shrinking economies will turn against the E.U. Rather like the man who has borrowed too much the loss of credibility will turn QE into an implosion.  The strain on the E.U., as a structure, may be too much.

The elections on Sunday in Greece may produce the first fracture in this E.U. structure? If E.U. QE does not produce growth, then we believe we will enter a dangerous period for the world. The tsunami from the financial world will hit the rest of the world’s structures, with governments entering crises not see since the last war in Europe.

More importantly, the stress on the global monetary system itself is now rising, as volatility in exchange rates and capital flows across the system are creating separate pressures. We see gold moving from a ‘safe-haven’ investment to a role where it will be used to reinforce credibility in the world of currencies.

Again, the silver price is keen to hold its gains waiting for gold to hold above $1,300.

On the markets, New York closed yesterday at $1,303.70 up $10.20 as the euro started to really tumble again. In Asia and early London the gold price slipped slightly to $1,296.60 with the euro much weaker at $1.1324 down 2.66 cents against the dollar. The Fix saw the gold price set at $1,293.50 up $6.50 and in the euro, at €1,150.289 up €42.334, while the euro was 3.76cents weaker at $1.1240. Ahead of New York’s opening gold was trading in London uncertainly, at $1,294.00 and in the euro at €1,151.86.

The silver price closed at $18.38 up 23 cents. Ahead of New York’s opening it was trading uncertainly at $18.20.

There were no sales or purchases of gold from or into the SPDR gold ETF but a sale of 0.63 of a tonne from the Gold Trust on Thursday. The holdings of the SPDR gold ETF are at 740.451 and at 166.99 tonnes in the Gold Trust

 

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