Gold drifting with Shanghai closed for another day

Gold Today –New York closed at $1,267.00 yesterday after closing at $1,256.10 Friday. London opened at $1,264.00 today. 

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

         The $: € was stronger at $1.1157 after Friday’s $1.1227: €1.

         The Dollar index was stronger at 97.50 after Friday’s 97.08

         The Yen was slightly stronger at 111.07 after Friday’s 111.10:$1. 

         The Yuan was much stronger at 6.8546 after Friday’s 6.8615: $1. 

         The Pound Sterling was weaker at $1.2859 after yesterday’s $1.2871: £1.

Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    5    30

     2017    5    25

     2017    5    24

SHAU

SHAU

SHAU

 

 

280.35

279.54

On holiday still

280.04

278.55

$ equivalent 1oz at 0.995 fineness

@    $1: 6.8615

       $1: 6.8737

       $1: 6.8906     

 

  /

$1,263.58

$1,261.82

On holiday still

$1,262.18

$1,257.35

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.]

 While Shanghai is closed we feel it opportune re-make an important point on what is going on with the authorities in China, with reference to overall markets there. China wants to gain a reputation of being a reliable, reputable source of prices. This, in the first place, means reducing the volatility, on a permanent basis, that characterized its markets. Its people have become deeply untrusting of equity markets due to their past extreme volatility.

This policy has taken priority over the freeing up of Capital Controls despite the desire to be a freely floating currency. Once Chinese markets have the reputation, sufficient to attract foreign investors on a comparable basis to the U.S., the Chinese will be able to open up their borders and, hopefully, be attractive to global investors. Dropping Capital Controls before that would make Chinese markets extremely vulnerable.

In the gold market in Shanghai, since the beginning of this year, we have seen the People’s Bank of China attack speculation. By reducing the size and cost of individual contracts, speculation has become extremely expensive. The result of this is a less volatile market. Because Shanghai’s gold prices are exerting a greater and greater influence on the rest of the world’s gold markets, the entire global gold market is becoming far less volatile than the Technical picture would have forecast.   

Silver Today –Silver closed at $17.32 yesterday after $17.16 at New York’s close Friday.

LBMA price setting:  The LBMA morning gold price was set today at $1,262.80 from Friday’s $1,265.00.  The gold price in the euro was set at €1,131.03 after Friday’s €1,130.37.

Ahead of the opening of New York the gold price was trading at $1,260.50 and in the euro at €1,128.87. At the same time, the silver price was trading at $17.27. 

Price Drivers

With China still closed today, the main influence on the gold price has been the moves of the dollar and euro. The dollar is stronger today after the E.C.B.’s Draghi made it clear that despite the lift in the economic picture, they felt that it could be temporary, so it was too early to contemplate any form of tightening of the easy money picture in the E.U. Certainly, the E.U. economy is not served well by a strong euro.

We do expect the euro to be volatile and vulnerable in the next few months as the Italian elections approach, likely in September.

Once Shanghai is open again [tomorrow] we expect to see stronger moves in the gold prices. It is only then that we will be able to see if demand there is strong enough to make it through what’s left of resistance. Meanwhile, the influence of London and New York will be to make the gold price consolidate with a negative bias.

Gold ETFs – Friday, saw no sales or purchases of gold to or from the SPDR gold ETF and no change in the holdings of the Gold Trust. Their holdings remain at 847.452 tonnes and at 202.82 tonnes respectively.

 

Since January 6th 2017 38.678 tonnes have been added to the SPDR gold ETF and the Gold Trust.

Julian D.W. Phillips 

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

 

Gold falls below support. Indian gold sees strength.

Gold Today –New York closed at $1,269.50 yesterday after closing at $1,263.80 Tuesday. London opened at $1,264.40 today. 

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

         The $: € was weaker at $1.0892 after yesterday’s $1.0877: €1.

         The Dollar index was weaker at 99.01 after yesterday’s 99.19

         The Yen was stronger at 111.30 after yesterday’s 111.47:$1. 

         The Yuan was weaker at 6.8940 after yesterday’s 6.8907: $1. 

         The Pound Sterling was stronger at $1.2900 after yesterday’s $1.2815: £1.

Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    4    27

     2017    4    26

     2017    4    25

SHAU

SHAU

SHAU

/

282.31

283.54

/

282.17

283.39

$ equivalent 1oz @    $1: 6.8940

       $1: 6.8907

       $1: 6.8862

      

  /

$1,274.30

$1,280.69

/

$1,273.67

$1,280.01

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 was trading at 283.00 towards the close today. This translates into $1,272.42. New York closed at a $2.92 discount to Shanghai’s close yesterday. London opened at a discount of $8.02 to Shanghai’s close today.

While Shanghai’s gold prices continue to slip, New York took prices up to the level of Shanghai’s close yesterday [Take $5 off Shanghai prices in the table to see that, to account for the difference in the quality of gold being priced] but London pulled prices back at its opening.

LBMA price setting:  The LBMA gold price was set today at $1,264.30 from yesterday’s $1,264.95.  

The gold price in the euro was set at €1,159.38 after yesterday’s €1,162.96.

Ahead of the opening of New York the gold price was trading at $1,265.30 and in the euro at €1,162.53. At the same time, the silver price was trading at $17.43. 

Silver Today –Silver closed at $17.49 yesterday after $17.63 at New York’s close Tuesday. Silver is falling much faster than gold. As the silver price primarily reflects the U.S. silver market their price is certainly pointing downwards. If gold does not follow you can be sure that there will be a strong bounce soon. But if gold does break down, the silver price may well not fall as far.

Price Drivers

The gold price did not break down in New York yesterday but recovered to very close to Shanghai’s close yesterday.

There were no sales or purchases into or from the U.S. based gold ETFs, so there was no market reason for the rise and that rise dissipated in London.

The big event in the U.S. was the publication of the new U.S. Tax Code proposed by the Trump administration. While it was in line with his election promises, it has a long way to go before it is law. The market barely reacted to the event. There are doubts as to whether it will pay for itself as it relies on creating growth to generate additional income on which a similar amount of tax revenue will be achieved as is achieved today. Trump’s target is to also create ‘millions of jobs’ through such measures. As Bloomberg put it in an article yesterday, extra capital injections from richer companies could lead to loss of jobs as robots replace labor. This is happening and there are no proposals to find labor other permanent jobs.  Thus the President’s election promises are becoming more difficult to achieve by the day. That’s if they can be put into law.  

The second main event is that the NAFTA treaty will not be scrapped, but renegotiated. The election promises of scrapping it would have destroyed potentially millions of jobs, so Trump is having to be more pragmatic by the day. Such is reality.

The impact on the gold price was neutral. It was the weaker dollar that boosted gold in the U.S. slightly. But even there, the gold price has been slipping with a weak dollar the opposite of its usual behavior.

India

Akshaya Tritiya happens tomorrow in India. The market in India expects around 20-30% increase in demand during Akshaya Tritiya, compared to last year. This is because it is happening in the wedding season. It is clear that the new Rupee notes are now sufficient to completely replace the old notes. Add to that the stronger Rupee that has lowered the gold price to bargain prices for Indian buyers, in Rupees.

It may also be that the proposed 3% GST tax will bring forward more buying. What’s for sure is that the smugglers will be delighted with such a new tax, taking their potential income to double figures then. We have no doubt that in India smugglers now supply a major portion of gold supply.

Gold ETFs – Yesterday saw no sales or purchases in the two major U.S. gold ETFs after a sale of 5.921 tonnes out of the SPDR gold ETF (GLD) a day earlier but no change in the iShares Gold Trust (IAU). Their holdings are now at 854.25 tonnes and at 204.36 tonnes respectively.

Since January 6th 2017 47.20 tonnes have been added to the SPDR gold ETF and the Gold Trust.

Julian D.W. Phillips 

 GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance