Gold and silver moving up on weaker dollar

Gold Today –New York closed at $1,196.20 on the 16th January after closing at $1,198.30 on the 13th January. London opened at $1,213.20 today.

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

         The $: € was weaker at $1.0650: €1 from $1.0593: €1 yesterday.

         The Dollar index was weaker at 101.09 from 101.70 yesterday. 

         The Yen was stronger at 113.44: $1 from yesterday’s 114.11 against the dollar. 

         The Yuan was stronger at 6.8860: $1, from 6.9082: $1, yesterday. 

         The Pound Sterling was stronger at $1.2115: £1 from yesterday’s $1.2056: £1.

 Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    1    17

     2017    1    16

      2017    1    13

SHAU

SHAU

SHAU

/

269.21

268.51

/

270.15

268.96

$ equivalent 1oz @  $1: 6.8860

      $1: 6.9082

$1: 6.8873

  /

$1,212.10

$1,212.61

/

$1,216.32

$1,214.64

Please note that the Shanghai Fixes are for 1 gm of gold. From the Middle Eat 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.]

 Shanghai gold prices moved higher, with strength, through the $1,210 resistance. It traded today over Yuan 270 reaching 272 at one point. This equates, on today’s exchange rate, to $1,219.57 and $1,228.60.

Chinese investors know the Yuan will continue to fall and are protecting themselves against this. While the People’s Bank of China has been selling dollars to lift the Yuan over the last week, we doubt they will keep doing this after President Trump as of the 20th January takes office. China is preparing for a confrontation with him. We therefore see the Yuan continuing to weaken in 2017 and Chinese demand to remain robust, despite Xi’s plea not to go to a trade war and keep markets free at Davos.

New York closed $15.12 lower than Shanghai on yesterday. London opened at around $7.00 lower than Shanghai was trading today.

LBMA price setting:  The LBMA gold price setting was at $1,217.50 this morning against yesterday’s $1,202.75. 

The gold price in the euro was set higher at €1,138.49 after yesterday’s €1,135.96 as the dollar weakened.

Ahead of the opening of New York the gold price was trading at $1,214.20 and in the euro at €1,133.97.  At the same time, the silver price was trading at $17.00. 

Silver Today –Silver closed at $16.76 at New York’s close yesterday from $16.80 on the 13th January. 

Price Drivers

U.S. physical buying or selling into or from the U.S.-based gold ETFs was absent from the market yesterday due to the Martin Luther King Day holiday. With a weaker dollar, this should have led to higher gold prices, but somehow New York prices did not go higher despite stronger prices in London and Shanghai. New York’s influence over the gold price in such conditions is weak, so we expect New York to see a ‘shunt’ effect and go higher today, simply because of the price differential.

In London the gold prices moved with the euro, rising in dollar terms but steady in the euro. Before New York opened the dollar continued to weaken, but dealers, aware of New York’s close yesterday pulled prices back. This will accelerate the moves higher.

Influences to make it rise further in the developed world will be significant as Prime Minister May made clear her policies on Brexit. Prime Minister Theresa May pledged to pull Britain out of the European Union’s single market while staying inside parts of its customs union, saying the U.K. parliament will get a vote on the final Brexit deal.

Sterling was discounting some of the bad news, but has the capacity to fall further and further in the days to come. This means that gold is rising strongly in st

erling terms and will continue to do so. However, at the time of writing, sterling was strengthening.

The fundamentals for gold are improving strongly as Indians return to the gold market, alongside Chinese demand. The tensions of a Trump Presidency are mounting promising confrontations with China and with the E.U. as his tweets indicate. The relative calm on the international front seems to have already been disrupted by Trump. We wait to see just how many of these comments can be brought to action?

Gold ETFs – As noted above, yesterday, in New York, there no purchases or sales into or from the SPDR gold ETF or the Gold, leaving their respective holdings at 807.96 tonnes and 198.30 tonnes. 

Since January 4th 2016, 205.38 tonnes of gold has been added to the SPDR gold ETF and to the Gold Trust. 

Julian D.W. Phillips : GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance  

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China’s SGE gold withdrawals in April 171 tonnes

The latest announcement from China’s Shanghai Gold Exchange (SGE) shows that  gold withdrawals for April totalled 171.4 tonnes so remain subdued compared with the past couple of years.  For the first four months of the year 687.3 tonnes were withdrawn, very sharply below the 820.6 tonnes at this stage a year earlier (admittedly a record year) – representing a fall of over 19% year on year. However, even at the current lower monthly rate taken out over the full year this would suggest SGE withdrawals remaining at over 2,000 tonnes for the full year  Thus even at a lower level Chinese gold demand as represented by SGE withdrawals – although there are some arguments from top analysts that these overstate the nation’s true absorption of physical gold – do account for a very significant proportion of the world’s newly mined supply of gold – currently around 3,200 tonnes a year.

Indian gold imports have also been low in the first four months – initially due to demand being held back ahead of the late February budget in the hope of a reduction in import duties – and subsequently due to strike action by the jewellery sector disappointed that the duty cuts were not forthcoming.  Thus the recent performance of gold, given what has been a strong downturn in Asian demand, has been all the more remarkable.

To a significant extent growth in Western demand, represented by purchases into the major gold ETFs and strong buying of gold coins and investment bars has been making up a lot of the shortfall from Asia. The biggest of the gold ETFs, SPDR Gold Shares (GLD) for example, has added around 192 tonnes of gold so far this year alone. It is still hugely below its peak, but is currently back at a level last seen in December 2013 with holdings at the end of last week at 834.19 tonnes.  It has put on 30 tonnes since the end of April.  And according to Bloomberg i inflows into all the gold ETFs it follows totalled around 330 tonnes in Q1 alone.  It thus looks as though ETF inflows are taking up any slack represebted by what is very probably a temporary downturn in Asian demand and gold flows.

The other contributor to the strong price performance in terms of logistics rather than just sentiment is that physical gold actually appears to be in relatively short supply with available inventories falling in the USA and the UK, where most is held.  The head of one of Switzerland’s largest gold refineries recently told Jim Rickards of problems in securing sufficient supplies to meet demand.  With new mined gold supply almost certainly plateauing, and possibly even beginning to turn down, demand shortages could be exacerbated further.   A recent analysis by Paul Mylchreest, who many may remember as the author of the sadly missed Thunder Road Report also even suggests that the London Bullion Market may even be in deficit.

 

Metals Focus more positive on gold – $1,350 by year end

Today will be a busy day for gold analysts.  The two biggest London-based precious metals consultancies, Metals Focus and GFMS are both releasing their latest treatises on the global gold market and analysts will be poring over the plethora of data in the reports.

First off the blocks is Metals Focus with its 99-page Gold Focus 2016 report.  At the time of writing the GFMS publication (in the event a marginally less heavy publication at 96 pages) was not set to be released for another hour.  The two reports will be somewhat similar in content if not necessarily in their conclusions as both consultancies have similar roots with Metals Focus originally formed primarily by a breakaway group of former GFMS analysts.

The two consultancies’ views on where the gold price is likely to go in the medium term will thus be of particular interest.  The teams of analysts who work on these reports are basically impartial without any specific axe to grind and while their predictions will largely be based on fundamentals – and it’s often arguable whether the gold price necessarily follows such in the short and medium term where easily swayable sentiment and extraneous geopolitical and geo-economic factors may impact.  But even so their research and views are seen as significant in terms of the underlying situation.

In the event Metals Focus is definitely more bullish on the likely progress of the gold price than it has been for some time.  In an accompanying press release, Metals Focus Director, Nikos Kavalis comments “changing expectations towards the outlook for US interest rates, concerns about monetary policy elsewhere, as well as turbulent equity and bond markets, have re-kindled institutional investor interest in the metal.”  This has shown itself initially in the very positive performance of gold in the first quarter of the current year – the best early year performance since 2008, the consultancy notes.  (That on its own may generate some warning bells – economic history does tend to repeat itself!)  This in turn helped gold to rally by over 21% from end-2015 to a $1,285 peak in early March.

Kavalis then added the comment “this impressive recovery will mark the end of the bear cycle that started in late 2011. Further gains later in the year are forecast to see gold peak at $1,350 by end-2016, almost 30% higher than its December 2015 low.”  This is a remarkably positive statement from a consultancy which is always extremely conservative in its overall projections.  While not positive enough for the gold bulls out there – who are perhaps looking for even higher year-end levels  – it does represent a very positive view from one of the sector’s mainstream consultancies.

Thus this expectation reflects Metals Focus’ belief that the change in investor sentiment seen in the first quarter is more likely to solidify than melt away in the months ahead. Its analysts expect the pace of US rate increases will be slow, in line with the current market consensus. Related to this, the Consultancy believes that the upside for the US dollar is limited. In addition, confidence in central banks has been shaken and there are mounting concerns towards the increasing number of negative policy rates around the world.  All these factors are seen as being positive for gold in the current year.

Finally, Metals Focus notes, the landscape across other investment classes is also positive for gold, given the turmoil in equity and bond markets and signs that the wider commodity bear market may well have passed.

The consultancy therefore expect that investor inflows into gold will continue in the months ahead, as an increasing number of managers are convinced by the metal’s medium-term prospects and as interest also grows in the wealth management and private banking sectors from which gold had almost been seen as of no interest over the past three years of seemingly ever-rising general equities. Given the overall long overhang in gold remains low, compared to the levels seen during the bull market, the analysts believe that there is scope for fund inflows to remain significant.

Coming back to gold’s fundamentals it is also reckoned that these are trending positive for the metal too.  After years of consistent increases, mine production is seen as beginning to decline this year, although perhaps only marginally so.  Scrap supply is also forecast lower.

Jewellery and physical investment demand are seen as remaining virtually unchanged, in spite of higher gold prices. Finally, the consultancy notes, while the overall volumes may decline somewhat, central banks will remain net buyers for yet another year, although the vast bulk of this demand is coming from only two nations – Russia and China.  Will others follow suit?

Metals Focus does warn however that any upwards path for the gold price will not necessarily be a smooth one.  It points out that over the past few days in late March, the gold price suffered a 6% correction from its earlier peak. Further losses cannot be ruled out, particularly given public data and field research both suggesting some of the recent buying had been tactical rather than strategic in nature.

Likely triggers for moves both up and down will continue to come in the form of changes in the consensus expectations for US monetary policy, moves in the strength or otherwise in the US dollar, equity and bond markets. Nonetheless, Metals Focus believes that such corrections will be both limited and short-lived, with the December lows unlikely to be revisited.

So $1,350 gold by the year-end.  As noted above the true gold bulls will be looking for a higher figure and may be disappointed by the Metals Focus conclusions.  But for the long suffering gold investor, and for the gold miners which are generally in a far better position than many doom and gloom merchants have been suggesting, a year-end gold price at this kind of level will be very welcome.

For more information about the Metals Focus Gold Focus analysis click on www.metalsfocus.com