Shanghai beginning to call the gold price tune?

Gold TodayGold closed in New York at $1,346.50 on Wednesday after Tuesday’s close at $1,346.10.  London opened at $1,352.

    • The $: € was very weak at $1.1329 from $1.1262.
    • The dollar index was weak at 94.35 from 94.96 Wednesday.
    • The Yen was stronger at 100.08 from Wednesday’s 100.76 against the dollar.
    • The Yuan was slightly stronger at 6.6324 from 6.6330 Wednesday.

 

  • The Pound Sterling was slightly stronger at $1.3144 up from Wednesday’s $1.3014.

 

Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
2016  08  18

2016  08  17

SHAU

SHAU

288.80

287.60

288.84

287.39

Dollar equivalent @ $1: 6.6324

$1: 6.6330

$1,354.36

$1,348.61

$1,354.55

$1,347.63

In almost a repeat of yesterday Shanghai was much higher than New York’s closing but London decided to walk its own road opening lower at $1,352. Dollar weakness continues heavily, as seen in the dollar index as well as against the euro. We are in a time when a large number of experts are calling the dollar higher, but it consistently does the reverse.

With emerging and higher risk nations offering higher yields, their currencies are strengthening and will continue to do so until we do actually see a rate hike [which we don’t expect until next year].

LBMA price setting:  $1,347.10 after Wednesday 17th August’s $1,342.75.

The gold price in the euro was set at €1,188.60 down €3.05 from Wednesday’s €1,191.65.

Ahead of the opening in New York the gold price stood at $1,350.15 and in the euro at €1,191.3.  

Silver Today –The silver price closed in New York at $19.66 on Wednesday down from $19.80 on Tuesday.  Ahead of New York’s opening the price was trading at $19.75.

Price Drivers

Yesterday saw heavy sales from the U.S. gold ETFs and this pulled New York prices down a little. Overnight saw prices rise in Shanghai which is leading the way lately, in setting gold prices.

Is it right to describe higher prices in Shanghai as a premium over New York/London’s prices or should we say that New York is trading at a discount to Shanghai?

The physical statistics says the second, but COMEX, until recently, led the way on gold prices. We are watching carefully to see if the pattern persists and if global markets take the lead in gold prices from Shanghai. This would mean that pricing power is moving to Shanghai. This is significant in that it alters the factors influencing the gold price, making them more globally oriented, as opposed to U.S. oriented. It would then make for a more believable gold price, both in monetary terms and physical terms.

The Fed Minutes described a split in the FOMC, but where the ‘hawks’ sat was on the non-voting side and the ‘doves’, led by Janet Yellen, sat on the voting side. The factors affecting the ‘doves’ were global influences as well as productivity, alongside wages. We can see that while the U.S. economy appears solid, the growth is low and not accompanied by a ‘healthy’ level of inflation. Hence the market views a rate hike in September with only a 21% likelihood and a hike early next year at a 50% likelihood. This prospect heightens the impact a rate hike will have on all global financial markets.

Gold ETFs – In New York on Tuesday there were sales of 4.453 tonnes from the SPDR gold ETF (GLD) but no change in the holdings of the Gold Trust (IAU). This left their respective holdings at 957.775 tonnes and 223.85 tonnes.

Silver –Silver prices should continue around current levels until there is a breakout in the gold price, one way or the other.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

 

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Gold and Silver Versus the Machines

By Clint Siegner*

Buying and Selling with HFTs

Investors have seen this a thousand times before. The reaction in gold and silver markets was almost as predictable as the sunrise. When markets continually respond to highly managed data from the Bureau of Labor Statistics – or some other bureaucracy – in a machine-like way, you have to assume it’s because most of the trading is actually done by high frequency trading machines (HFTs).

The algorithms calculated the Fed probably would not hike any time soon when employment missed expectations by a mile in early June. Precious metals rallied.

Gold and silver prices stumbled the following month when the same report showed much better than expected data. It was rally time again in late July when the GDP data turned out to be a big disappointment. Now there is “good news” on jobs and the machines responded by selling.

It’s been going on for years. Actual humans grow tired of the constant whipsaw around Fed policy expectations and some ask more fundamental questions. For instance, do we have free markets when what matters most is government data and how the central planners at the Federal Reserve might respond to it?

It is this kind of question that separates bullion investors from high frequency trading algorithms which dominate trading in the futures markets. Machines can scan the headlines and respond in milliseconds by placing a buy or sell order on the COMEX. They aren’t concerned about how much physical metal there is backing a futures contract. And they can’t worry about their children and order some silver bars to set aside for them.

Bullion investors ask more philosophical questions and, unlike machines, they can be skeptical of the headlines.

Friday’s jobs report is a good example. In July, the U.S. economy lost more than a million jobs versus June according to the raw data. As is often the case, “Seasonal adjustments” by government economists turned far from stellar data into “good news.”

People buy physical metal because they look past the headlines and ask more meaningful questions. They wonder what the consequences for all of this reliance on fudged data will be and why a tiny group of bankers with a dubious (and corrupt) track record is governing their money.

Unfortunately, in the short run, the superficial Fed rate hike “computer query” the HFTs are constantly running has a big impact on metal prices. The questions bullion investors are asking won’t always govern price discovery in metals until, suddenly, they are the only ones that matter.

*Clint Siegner is a Director at Money Metals Exchange, the national precious metals company named 2015 “Dealer of the Year” in the United States by an independent global ratings group. A graduate of Linfield College in Oregon, Siegner puts his experience in business management along with his passion for personal liberty, limited government, and honest money into the development of Money Metals’ brand and reach. This includes writing extensively on the bullion markets and their intersection with policy and world affairs.

Bullion bargain hunters could miss the boat

By Clint Siegner, Director, Money Metals Exchange*

Investors need to feel like they are getting a bargain – that prices can head much higher still. Many aren’t “feeling” it in the bullion markets. Now that silver has made a run back to $20/oz and gold is once again at $1,350/oz, the metals don’t seem cheap. Some investors are even grabbing the opportunity to sell.

The U.S. Mint finally caught up with orders for the silver American Eagle. Dealers are no longer faced with rationing by the dysfunctional government mint. And premiums for bellwether 90% silver U.S. coin bagsare falling. For the first time in years, there is more than enough being sold back into dealer stocks.

90% Silver Quarters and Dimes90% silver dimes and quarters are available at the lowest premiums in years.

That makes now a good time to take a look at the landscape and decide whether metals are topping out here – or if today’s prices still represent a bargain.

We can start with economic growth and what that implies for Federal Reserve policy. Last week’s report on second quarter GDP missed expectations by a mile – coming in at just 1.2%, and the anemic growth numbers in the prior two quarters were revised downward. The Wall Street Journal characterized the “recovery” in the U.S. as the “weakest of the post-World War II era.”

The author also points out that, at 7 years, this “recovery” is getting long in the tooth.

This reality doesn’t jibe with comments from the Fed. It’s an awkward time for our central bankers. They promoted wildly unpopular bank bailouts and programs to buy Wall Street’s most toxic and fraudulent loans. They printed trillions to monetize Treasury debt. They pushed interest rates down to zero, which has decimated seniors and others who depend on interest income.

They told us these measures were absolutely essential to returning the U.S. economy to solid footing. But this pathetic “recovery” is all they have to show for it.

It is cannot be totally ruled out that Fed officials could be right, that, after 7 years of tepid growth, the U.S. economy will finally lift off. That the Fed will finally normalize interest rates and no more stimulus will be necessary. There are market observers out there who still believe this to be possible.

We don’t buy it. Even if, by some miracle, our stimulus-addicted economy can find a way to grow during withdrawals of stimulus, Congress can no longer live without the Fed’s magic money machine.

Highest Probability Bet Is Lower Interest Rates, Higher Gold Prices

The Congressional Budget Office is projecting the federal government will rack up another $9.4 trillion in debt in 10 years. That may be wishful thinking. They have a history of underestimating how much programs will cost. Normalizing interest rates 3-4% higher than they are currently will lead to crushing public and private debt service payments and send the economy off a cliff.

And no, electing Donald Trump as president won’t solve this problem either.

We suggest it would be wiser to bet on negative interest rates, or helicopter money, or both. That means the dollar has much further to fall and gold and silver prices are just getting started on their journey north.

Investors Waiting Too Long May Get Left Behind

Bullion investors should also consider that, despite the rise in prices, the value proposition for gold and silver is quite compelling. Speculative interest in gold and silver futures is near all-time highs. Same for ownership in metals ETFs. Heavy speculative inflows in recent weeks may be cause for concern about precious metals markets overheating near-term. But by comparison, the bond and stock markets have been overheating for years.

The “smart” money is dumping stocks and looking for alternative assets given that equity prices are so high with so little in the way of profits to support them. Large investors aren’t buying Janet Yellen’s assurances about recovery, and they are increasingly uncomfortable with price to earnings valuations at the current levels.

Want to know something else institutional investors don’t love? A 1.5% yield on a 10-year Treasury note. They may be buying bonds – perhaps because they anticipate yields are going even lower or even negative – but the lower yields go, the more attractive metals become. No one has to sacrifice much interest to hold metals instead of cash or bonds.

Many hedge fund managers, including some who previously hated gold, are looking in consternation at inflated stock prices and epic low yields in the bond market and saying, why not? At least gold and silver are among the best performing assets of the year, and prices are still nowhere near all-time highs like bonds and equities.

There is certainly nothing wrong with bargain hunting. Bullion investors just need to remember that when prices are in an uptrend, finding a bargain means not waiting too long to buy.

*Clint Siegner is a Director at Money Metals Exchange, the national precious metals company named 2015 “Dealer of the Year” in the United States by an independent global ratings group. A graduate of Linfield College in Oregon, Siegner puts his experience in business management along with his passion for personal liberty, limited government, and honest money into the development of Money Metals’ brand and reach. This includes writing extensively on the bullion markets and their intersection with policy and world affairs.  This article first appeared on the www.moneymetals.com website

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]

Gold and silver prices still base building

Gold TodayGold closed in New York at $1,332.30 on Tuesday after Monday’s close at $1,329.30.  

    • The $: € rose to $1.1002 down from $1.1058.
    • The dollar index rose to 97.12 from 96.77 Tuesday.
    • The Yen was slightly weaker at 106.48 from Tuesday’s 106.11 against the dollar.
    • The Yuan was stronger at 6.6785 from 6.6920 Tuesday.

 

  • The Pound Sterling was weaker at $1.3178 down from Tuesday’s $1.3167.

 

Yuan Gold Fix

Shanghai prices were not available on site today.

The People’s Bank of China stepped into the Yuan market today and strengthened the currency as you can see above.

We continue to expect the Yuan to weaken down to 7.00 to the U.S. dollar by year’s end.

Bear in mind that with all the competitive devaluations across the world the dollar’s strength also meant the Yuan’s strength when it was around 6.2 to the dollar. China has not been devaluing against the dollar but is now trying not to be strong with it.

The fall in the Yuan is being engineered cautiously and without attracting too much attention. So far it has succeeded. Perhaps the PB of C is now trying to slow the fall so as to stay in the shadows.

LBMA price setting:  $1,325.60 down from Tuesday 19th July’s $1,332.20.

The gold price in the euro was set at €1,204.00 down €0.74 from Tuesday’s €1,204.74.

Ahead of the opening in New York the gold price stood at $1,323.75 and in the euro at €1,202.21.  

Silver Today –The silver price closed in New York at $20.00 on Tuesday down from $20.07 on Monday.  Ahead of New York’s opening the price was trading at $19.74.

Price Drivers

With tomorrow’s European Central Bank meeting gold and silver prices are trying to mark time in a poor Technical environment.

Most expect the E.C.B. to do nothing, but the pressure is mounting heavily for more easing.

The euro remains relatively strong and the economic outlook for the E.U. remains tilted to the downside. The potential for a recession is there. So something must be done.

Yes, most are worrying that there is insufficient post-Brexit data to go on, but the need for more easing is very clear. So while most do not believe Draghi will do anything, we expect action!

Such action will precipitate a fall in the euro, the E.U. hopes, but as we have said many times before, the U.S. cannot afford to see a dollar rise through the 100 level on the dollar index.

Gold ETFs – In New York on Tuesday there were no purchases into the SPDR gold ETF, but there were purchases of 0.60 of a tonne into the Gold Trust, 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 are falling strongly, relative to gold, mainly on ‘marking down’ by dealers.

Julian D.W. Phillips

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

Gold and silver prices still have work to do

Gold Today –Gold closed in New York at $1,283.90 on Monday then it slipped in Shanghai, as you see below, then picked up again in London at the opening on Tuesday morning, to over $1,280.

The $: € moved from $1.1228 to $1.1268 overnight. The dollar index is standing at 94.46 down from 94.50.

Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
2016  06  14

2016  06  13

SHAU

SHAU

272.01

270.31

271.15

271.99

Dollar equivalent @ $1: 6.6017

$1: 6.5860

  $1,281.56

$1,276.58

$1,277.51

$1,284.52

Shanghai pulled back leaving London to lift the gold price. Is this a sign that supplies in London available to make the price are so little as to push prices up? It could be that U.S. demand is so strong that these supplies are diminishing too much. If this is the case, we should see greater volatility in the price in the near term. There is certainly enough going on in the currency world to cause such volatility.

The Yuan still continues to weaken, as expected, while the Japanese Yen is still being sought as a place to escape the dollar, the pound sterling and the euro. The currency war is being waged without relent at the moment.

LBMA price setting:  $1,279.40 down from Monday 13th June’s $1,284.10.

The gold price in the euro was set at €1,147.83 up from Monday’s €1,139.60.

Ahead of New York’s opening, the gold price surged to close to  $1,290 before settling back to the mid $1,280s

Silver Today –The silver price closed in New York on Monday at $17.42, up from Friday’s $17.30 a rise of 12 cents. Ahead of New York’s opening the silver price stood at $17.31.

Price Drivers

With the Fed meeting this week financial markets will be cautious, despite the common expectation of no rate rise. Add to this the fact that German Bunds are yielding a negative 0.00% now. The euro is weaker today as you can see above with the Yen getting even stronger. The Yuan is now 6.60 against the dollar. The weakening of the euro may well not last for long as it remains well off its recent peak weakness.

We have focused on the Brexit vote and its potential impact on markets, but we have not factored in a potentially devastating set of ‘ripple’ effects!

To be clear on this by isolating single events such as ‘Brexit’ there is a danger of ignoring collateral damage, which in turn may well create subsequent crises. For instance if heavy outflows of capital from Britain take place how will the euro be affected? Will such an event damage global growth still further? At what point in a disrupted currency world will protectionism raise it ugly head?

The scene is gold positive and consequently silver positive.

Gold ETFs – On Monday the holdings of the SPDR & gold Trust rose as 2.377 tonnes was purchased into the gold ETF, leaving its holdings at 896.295. No purchases or sales were made in the Gold Trust, leaving its holding at 196.90 tonnes.

The purchases were not sufficient to move the gold price in the U.S. as the gold price is attacking overhead resistance now. This level must be broken for gold to move to attack $1,300. We feel it will take a declining dollar to achieve this. This could prove difficult as both the pound and the euro are under downward pressure, pushing the dollar higher against them.

Silver –Silver decided it would try to climb higher yesterday as you see above. But today it is retreating and as we write is at $17.34. We treat this as still trading around $17.3, waiting for gold to break strongly either way.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

Jobs, Brexit and Gold – the unholy trio that are upsetting the Fed applecart

As maybe I’ve mentioned before, of the plethora of supposedly independent information and reports which come through to me in my daily emails, one I will always read assiduously is Grant Williams’ Things that make you go hmm… twice monthly (usually) newsletter.  Not only does he take a pretty jaundiced view of much of what passes for mainstream economic analysis and media comment, but he expresses his opinions forthrightly and with good humour as anyone who has attended one of his conference presentations will be well aware.

Grant is both a Singapore-based fund manager and very well followed commentator on geopolitics and economics and he occasionally touches on gold as a part of this terrific coverage in his subscription-based newsletter.  He makes you sit up and think – and understand that much of what data is released by governments, central banks and government funded economists is more akin to some of the claptrap often put out by junior mining and exploration companies (and some bigger ones too) and their PR companies in trying to hoodwink investors by putting a strong positive spin on financial and drilling results which often, on deeper analysis, should be suggesting quite the opposite.

His latest newsletter, entitled ‘The 60 Second Excitement’ looks in some depth, inter alia, at the latest U.S. non farm payroll figures, the possibility of a Brexit (Britain leaving the European Union) and their combined effect on the gold market, gold stocks and the gold price should the initially unexpected materialize – as it has already done with the U.S. jobs figures.

Let’s take all these in order:

Firstly the latest U.S. jobs statistics which showed an increase in non-farm payroll figures for April of only 38,000 – hugely below the consensus expectation of 160,000 – coupled with also reducing the figures for the prior two months as well.  Yet in Fed terms the positive spin was that the overall unemployment rate fell to 4.7% (below the Fed 5% target),  but conveniently ignoring the incontrovertible fact that according to government stats this relatively low unemployment rate has only been achieved by an ever-continuing rise in the percentage of people who have somehow withdrawn from the labour market altogether.  One is thus drawn to John Williams’ (no relation to Grant or myself – we Williamses seem to be getting around!) Shadow Stats, which looks at such government statistics more in the way they used to be calculated before goalposts were moved (several times in some cases).  According to Shadow Stats the U.S. unemployment rate is, in reality, is somewhat north of 20%, which would seem confirm reality rather than manipulated government statistics.

Prior to the latest jobs announcement observers had seen the likelihood of the Fed raising rates 25 basis points in June much more likely and gold had been suffering as a consequence.  After the jobs announcement the likelihood of a June rate rise receded substantially, although some observers feel a July rate rise still on the cards if U.S. economic data between now and then looks supportive – and if the U.K votes to stay in the European Union in the referendum on June 23rd.  Others think September, or even later, will see the next Fed rate rise.  Undoubtedly the Fed has talked itself into imposing another rate increase this year, or perhaps two, just to maintain what little credibility it may have left in its ability to really jumpstart the U.S. economy and promote sustainable growth.

But now back to Brexit.  As we have pointed out here before there’s a substantial underswell amongst the British public of anti-EU feeling.  Whether this will express itself in a Brexit vote remains uncertain – a set of opinion polls published today (so after the latest TTMYGH newsletter was written) – suggest that the Brexit vote may indeed carry the day, although the high powered government-based Remain propaganda machine may yet prevail.  But if the Brexit option does emerge triumphant in just over 2 weeks’ time, with its decidedly uncertain, and almost certainly immediately negative impact on the U.K. economy, there are a growing number who believe the impact on the whole European Union concept – and even on the global economy – could actually be even more severe.

There has been a huge ‘project fear’ campaign unleashed on the U.K. electorate by the Remain camp, but as Grant Williams points out all the statistics being put about predicting doom and gloom for the U.K. economy as a whole and for the wealth of the person in the street, are totally unquantifiable – much as the positive spin on some drilling results from exploration juniors could be equally speculative but on the positive side.  Not that the pro-Brexit campaigners are not equally guilty of disseminating unquantifiable statistics and suppositions of their own.

So what has all this to do with gold?  Gold tends to thrive on uncertainty and the Fed’s dithering over rate increases, growing concerns about whether the U.S. economy is actually growing, and the potential effects of a Brexit should it come about – which looks to be much more of a possibility now than it did only a couple of weeks ago, are all uncertainties gold could thrive on. Add to that the apparent beginnings of a downturn in global gold production and doubts about continuing supply availability, coupled with what has been enormous gold ETF demand so far this year, and this is all gold supportive.  True, Asian demand has slipped.  Indeed this fall in demand from the East coupled with the huge ETF demand shows there has been something of a reversal in gold flows with more flowing into the Western gold ETFs than into India and China combined.  But virtually no-one believes that Asian demand will not pick up again – quite probably later this year and if this is accompanied by a continuation of ETF inflows the doubts about availability of unattributable (i.e. freely available physical gold) will multiply.

Grant Williams also points to another supportive phenomenon in the performance of gold stocks which have been hugely outstripping the rise in the metal price, and which have been remaining relatively strong even through the recent correction in the gold price.  Some of the biggest gold stocks of all have more than doubled and the most significant gold stock indexes and ETFs have been outstanding performers vis-à-vis the gold price itself.  Gold stocks are often the precursors of significant moves in the gold price rather than just being followers.

But while the TTMYGH newsletter highlighted just the three factors noted above, Grant Williams goes on to end with the comment: There are plenty more (such factors).  He mentions China, the upcoming US elections, the explosion in corporate debt levels and perhaps the biggest problem of all—unfunded pension liabilities—which will all have a big part in determining what kind of outcome the world gets as the ghosts of 2008 return.  You have been warned.

The above article is a lightly edited version of one I posted onto the info.sharpspixely.com site a day earlier