Gold price currently dependent on dollar:euro exchange rate

With markets now on edge we are waiting for the dollar index to break above 100, or pull back. Worse still, the dollar is unlikely to do much if it holds below 100, just move sideways. But the importance of it holding current levels and not rising is enormous. As we say repeatedly, the U.S. suffers if the dollar gets much stronger and yet the E.U. wants the euro lower against the dollar. Further interest rate cuts into negative territory are expected in the E.U. alongside more asset purchases and the consensus of opinion among Fed Governors is growing for a December rate hike, so how can the dollar be held back?

The use of swaps between the E.U. and the Treasury has been the usual way to go and we expect will continue to be used in a larger way in the future.

We are still sitting on the edge of our chairs waiting for the I.M.F. announcement on the inclusion of the Yuan in the SDR scheduled for November. This may exert more upward pressure on the dollar as the Yuan then drops in value. It will not be a devaluation as the currency is ‘floating’, the same as most currencies do.  Then, we expect a gear shift in market turmoil as currencies across the board try to go lower, most against the dollar. Then we will see a more visible currency war!

There were sales of just over 4 tonnes of gold from the SPDR gold ETF yesterday but none from the Gold Trust. The holdings of the SPDR gold ETF stands at 655.692 tonnes in the SPDR gold ETF and at 160.27 tonnes in the Gold Trust. These sales seemingly had zero impact on the gold price as it continued to be dominated by the dollar: euro exchange rate and the dollar index. This pattern should persist today too.

We did see the attempt at another ‘bear-raid’ late on Sunday as Shanghai opened, as a major ‘futures’ sell-off happened. Yesterday’s physical sale of over 4 tonnes may well have been in support of this. It is noteworthy that there was no follow through in the gold price. While the futures markets are skewed to the downside and this bear raid produced only a small reaction, we have to ask the question, “Are we seeing a drying up of effective sales?” This is important.

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

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Shanghai’s gold pricing power ever-growing

On Friday New York closed at $1,092.10 up $2.80. The dollar is down more than half a cent at €1.0976, with the dollar Index weaker initially before rising to 97.85 down from 97.90. This morning the LBMA gold price was set at $1,094.80 up $3.45. The euro equivalent was €1,001.01 up €3.25. Ahead of New York’s opening, gold was trading in London above $1,094.30 and in the euro at €1,000.50.

The silver price closed at $14.77 up 12 cents in New York. Ahead of New York’s opening it was trading at $14.94.

There were sales from the SPDR gold ETF of 0.24 of a tonne but none from the Gold Trust on Friday. The holdings of the SPDR gold ETF are at 667.694 tonnes and 161.83 tonnes in the Gold Trust. With so little sold from these gold ETFs the gold price floated higher and in Asia it started to accelerate higher to $1,098 before pulling back in London’s morning.

As you can see from New York’s close the ‘bear raid has stopped, it seems, with less than quarter of a tonne sold from the SPDR gold ETF. If the market believes the selling has stopped there is only one way the market can go apart from sideways. It would take a headstrong seller to enter the market now unless he had a hefty amount of physical gold to sell. Meanwhile, the first buyer to break cover may find himself leading a herd?

Chinese demand is there solidly, as this morning’s price testifies and we are three weeks from the beginning of the gold season. Europe is on holiday until then, thereafter entering the busiest time in the developed world’s gold season too. We watch to see if instead of seeing the developed world unloading gold into Asia Shanghai comes to the developed world to take more gold from there to eliminate the premium? This would tell us just how far the evolution of the gold market has come this year and just how far Shanghai’s pricing power has grown.

The news out of the U.S. on Friday was good for the economy and the prospect of a rate hike either in September or December seems certain. But this did not prompt gold sales in the U.S. or London. Has the rate hike been discounted in the gold price? Friday’s behavior tells us, yes it has.

Oh, just in case you had forgotten Greece, it must have a bailout solution before August 20 or it will miss a payout to the ECB. The fact that a nation must borrow to service debt could not be a louder signal of its bankruptcy.

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

Will the gold bear raiders strike again today?

On Thursday New York closed at $1,089.30 up $4.30. The dollar is barely changed at $1.0911, with the dollar Index the same at 97.90. This morning the LBMA gold price was set at $1,091.35 up $6.35. The euro equivalent was €997.76 up €2.44. Ahead of New York’s opening, gold was trading in London above $1,091.20 and in the euro at €997.62.

The silver price closed at $14.65 up 5 cent in New York. Ahead of New York’s opening it was trading at $14.73.

There were no sales from the SPDR gold ETF but 0.75 of a tonne from the Gold Trust on Thursday. The holdings of the SPDR gold ETF are at 667.934 tonnes and 161.83 tonnes in the Gold Trust. With so little sold from these gold ETFs the gold price floated higher, close to $1,100 before pulling back in London’s morning.

Today, Friday, has become a big day in the gold world. With the jobs report due out today any number over 230,000 is likely to take the dollar stronger and be negative for gold.

Friday is also the day of the week when the ongoing bear raid, that has lasted for three weeks so far, makes its biggest hit, normally at the close of business in New York, selling large tonnages of physical metal from the SPDR gold ETF which is then  arbitraged by the GLD’s Custodian, HSBC across into Shanghai on Monday morning.

Initially such an operation slammed the gold price down, but in the last two weeks these tonnages have been taken off the market before they could impact the gold price. So it appeared China’s demand was affecting the gold price directly in arbitrage operations, a very important structural change for the global gold market. But is that so?

If the jobs report [and wage growth] is strong, we would not be surprised to see a large tonnage unloaded into China from the SPDR gold ETF today too. If the last two weeks is anything to go by, this tonnage may be taken off the market in Shanghai’s morning. How will we know?

If the gold price on Monday does not fall in Shanghai, then arbitrage operations into Shanghai will have become efficient and we will see a more global gold price.

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

Most interesting week ahead for gold

 

There were heavy sales from the SPDR gold ETF of 7.451 tonnes but none from the Gold Trust on Friday. The holdings of the SPDR gold ETF are at 672.703 tonnes and 162.92 tonnes in the Gold Trust.

These sales were made at the close on Friday in the manner of earlier ‘bear raids’ and did not hurt the gold price in New York. We continue to see the ‘bear raid’ selling when there are no buyers and forcing arbitrage selling into Shanghai. This morning that 40-tonne-trades-a-day market opened with this large amount in front of them at the opening. But it seems it too has been snapped up as the gold price has been unaffected, at least initially. Can we draw the conclusion that the ‘bear raid’ has been raided and its physical power taken off the market? It would seem so, but let’s see this week.

Now add to this situation one where U.S. banks are forecasting much lower gold prices, the media has rarely been so negative on gold and the mood for gold could not be worse.  It is rare that when a market is facing one way so much, that it goes that way! This week and next could prove to be the most interesting of weeks!

Many investors may have feared that the Paulson fund, the single largest investor in the SPDR Gold Trust at the end of the first quarter, may have been selling off his holdings in gold. Paulson & Co has retained a 10 million share stake, now worth about $1 billion, in SPDR Gold Trust. The fund had 10.23 million shares in the SPDR Gold Trust as of March 31, and the position has not changed materially since then.  This confirms that the selling has come from those hoping for a huge profit if prices go lower.

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

China wants healthy gold market. Is it intervening?

On Monday New York closed at $1,094 down $6. The dollar was almost unchanged at $1.1062, with the dollar Index slightly higher at 96.77 from 96.72. This morning the LBMA gold price was set at $1,095.60.  The euro equivalent was €990.60 down from €992.50 yesterday. Ahead of New York’s opening, gold was trading in London at $1,092.60 and in the euro at €990.57.

The silver price closed at $14.56 down 13 cents in New York. Ahead of New York’s opening it was trading at $14.61.

The ‘bear raid’ is either finished or pausing today, as no gold was sold from the SPDR gold ETF or the Gold Trust yesterday. As we have said many times before, Asia does not chase prices, but in the developed world there have never been so many short positions and a dearth of longs in COMEX.

The holdings of the SPDR gold ETF are at 680.154 tonnes and 163.85 tonnes in the Gold Trust.  Meanwhile dealers are moving prices in line with the moves of the euro against the dollar.

What did happen in China in the last day was the equity market plunged 8% despite the measures put in place by the government there. In the West the acceptance of the separation of the financial system from the political system is taken for granted, but in China the government controls everything. The financial system is controlled through the People’s Bank of China including the Shanghai Gold Exchange.

With the government there nurturing the financial system to maturity, such collapses or bear raids are taken as an attack on government as well. This is particularly so now that the government has been extremely high profile in trying to protect the equity market from further falls. These have failed to prevent further falls.  We expect measures to attempt to halt further falls in the equity market and by extension perhaps the gold price?

It is more than likely that an agent of the PBoC is taking off any dumped gold from New York and sold down in Shanghai [seen at the opening in the SGE] which appears to have happened this week. We need at least the rest of this week to see if this is really happening. Bear in mind China wants healthy financial and gold markets because they have visibly encouraged ownership of gold, so they will ensure the Yuan gold price will not go the way of the equity market.

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

Chinese and Indian gold price premiums on the rise.  Gold coin buyers rampant!

New York closed at $1,093.90 down $6.30 after closing at $1,100.20 on Tuesday. This morning in Asia the gold price rose back to $1,097 before the LBMA gold price was set at $1,101.65.  The dollar was weaker at $1.0996 after yesterday’s $1.0940 against the euro, with the dollar Index down to 97.03 from 97.28 yesterday. The euro equivalent was €1,001.86 down from €1,002.74 yesterday. Ahead of New York’s opening, gold was trading in London at $1,101.80 and in the euro at €1,001.73.

The silver price closed at $14.80 down 1 cent in New York. Ahead of New York’s opening it was trading at $14.87.

The ‘bear raid’ continues with another 2.384 tonnes of gold sold from the SPDR gold ETF on top of the  16 tonnes sold since Sunday night. The Gold Trust saw sales of 0.48 of a tonne yesterday. But there is a difference today. The impact on the gold price was zero as the gold price rose back to $1,097 in Asia. The holdings of the SPDR gold ETF are at 687.309 tonnes and 167.28 tonnes in the Gold Trust.

Retail demand in China is now jumping as it is in India, but it has still to reflect in London’s demand. The price rise in London was mainly due to a weaker dollar. But in both India and China premiums are rising with sales doubling in Hong Kong. Retail demand in these countries needs to feed through to Shanghai before we see this demand damage the ‘bear raid’.

One cannot know if the bears will continue their raids or how much gold they have to orchestrate their raids. The triggering of ‘stop loss’ protections has happened but will not continue unless more raiding takes place. How much demand will come from Asia now that it is picking up is key but if it matches the gold arbitraged into China, then the bears will have to cover their short positions. When we have more information we will be able to see where gold and silver are going. Gold coins buyers are rampant!

Many feel gold could have had its day, but such views are not those of long-term investors or central banks. With Russia continuing to build its gold reserves buying in its own production it is removing this supply from the global market, much as we believe China is doing. Kazakhstan takes all its local production into reserves and has done for years now. This adds to the reality that market prices in New York and London do not reflect global demand.

Silver ignored gold’s fall below $1,100 and has done so on its rise back there again. Investors should again ask why?

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