Gold exchanges battling it out for leadership

Gold TodayGold closed in New York at $1,337.90 on Thursday after Wednesday’s close at $1,346.70.  London opened at $1,337.

    • The $: € was slightly weaker at $1.1156 from $1.1144.
    • The dollar index rose slightly to 95.83 from 95.82 Thursday.
    • The Yen was slightly stronger at 101.04 from Thursday’s 101.28 against the dollar.
    • The Yuan was weaker at 6.6440 from 6.6406 Thursday.
    • The Pound Sterling was slightly weaker at $1.2956 down from Wednesday’s $1.2958.

 

Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
2016  08  12

2016  08  11

SHAU

SHAU

286.86

287.34

286.95

287.36

Dollar equivalent @ $1: 6.6440

$1: 6.6406

$1,342.92

$1,345.85

$1,343.34

$1,345.95

Shanghai took the gold price closing in New York higher more in line with the higher Shanghai price the day before. London then ignored Shanghai prices and opened at New York’s close. At the moment we are seeing a small battle between the developed world centers and Shanghai the physical market.  This battle can be resolved provided the arbitrageurs in the market do their job. They can’t move gold but can adjust their positions with currency plays.

We will be discussing the state of the gold market in China in particular the Commercial Bank gold market there, in our coming newsletters.

We are rapidly approaching the days when the Yuan becomes an integral part of the I.M.F.’ Special Drawing Rights. What will this unleash? Because the I.M.F. will not be able to dismiss it from this role thereafter, we do see more flexibility in the exchange rates of the Yuan. It is logical then that the People’s Bank of China then allow markets to establish the market exchange rate. We see that as continuing to fall to 7.00 to the dollar. No doubt this will produce howls of outrage from the U.S. if it happens brutally. But we suspect the PBoC. will make their adjustments behind the scenes so it happens gently.

What it does do for the Yuan is to establish it as one of the world’s main ‘hard’ currencies. The PBoC will then expand their program of Yuan globalization.

LBMA price setting:  $1,336.70 after Thursday 12th August’s $1,344.55.

The gold price in the euro was set at €1,198.40 down €7.80 from Thursday’s €1,206.20.

Ahead of the opening in New York the gold price stood at $1,338.85 and in the euro at €1,200.76 but some weak U.S. economic data saw the gold price move subsequently to over $1,350 again.  

Silver Today –The silver price closed in New York at $19.95 on Thursday down from $20.17 on Wednesday.  Ahead of New York’s opening the price was trading at $19.87. Following gold’s rise after the poor economic data, silver regained the $20.10 level

Price Drivers

Over the last day we have seen COMEX dominate London prices, ignoring those of Shanghai. The day before, saw Shanghai taking prices higher than New York and London following Shanghai. While the price differences are not that large and are influenced by exchange rates between the Yuan and the dollar, there is an ongoing pricing play between the two markets. With the Shanghai Gold Exchange/PBoC. Being the last resort counterparty we believe it does dominate prices. However, its prime objective in the exercise is not only to build a stable, orderly physical gold market and to have its prices dominate the world’s gold markets, it is to assist in the establishment of the Yuan as a leading ‘gold’ currency.

This is the way forward for the gold price. It makes little sense to have the world’s largest physical gold markets with 10,000 institutional participants and 8.3 million individuals so far bow to a mini-physical paper market in New York.

The most positive news today for gold and silver is the rapid approach of the “Gold Season” in September.

  • At this point the summer holidays for the developed world are coming to an end and the focus in the gold market is for jewelry producers to buy for the festive season at the end of the year.
  • In India, after falling to the lowest in seven years in the first half, demand for gold is certain to rise because of the excellent monsoon rains achieved this year since May continuing into September. This will boost rural demand during the festive season, starting in September.
  • In China, the expectation of a lower Yuan is broadcast in the Chinese media, encouraging growing demand in line with internal trends we mentioned in earlier newsletters from the Gold Forecaster.
  • In the last quarter of the year we expect U.S. demand for physical gold from investors in the shares of their Exchange Traded Funds to continue steadily.

     So far in 2016 investment demand for gold has overtaken the previous-ever high of 917 tonnes in 2009 [First half]  to reach 1,064 tonnes.

Gold ETFs – In New York on Wednesday there were no sales or purchases to or from the SPDR gold ETF (GLD) or the Gold Trust (IAU). This left their respective holdings at 972.618 tonnes and 221.24 tonnes.

Silver –Silver prices jumped back to over $20 after falling back this morning and will hold and move strongly when we see the strong move, either way, which we now expect from gold prices.

Julian D.W. Phillips

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

Next week will see steady rise in Asian gold demand

On Tuesday New York closed at $1,139.80 up $4.30. The dollar was stronger at $1.1335 at the close up from $1.1496, against the euro, with the dollar Index weaker at 95.39 down from 95.94 yesterday. The LBMA gold price was set at $1,140.00 down $1.90 today. The euro equivalent was €1,012.21. Ahead of New York’s opening, gold was trading at $1,136.85 and in the euro at €1,011.48.  

The silver price closed at $14.60 down 4 cents over Tuesday’s close in New York. Ahead of New York’s opening today it was trading at $14.55.

China is closed as we write this and will be closed until Monday. Without the upward pressure of gold demand from there will we see an attempt to force the gold price down again? This may be a last chance to try that before the ‘gold season’ really starts. As it is the gold price is in the mid-range of its gold consolidation phase at the moment. Next week will see Asian demand rising steadily.

It is important for the gold price that we note that the Chinese middle classes is still experiencing strong growth despite the overall growth of the country slipping back [but still amongst the healthiest growth percentages seen around the world]. It is these classes that will contribute to growing demand for gold.  

While equity markets around the world continue to fall heavily [we expect this to continue] gold is putting up a solid performance in dollar terms and an even better one in all other currencies. We are saying here that gold is acting very differently compared to other markets; a feature gold shows best when times are tough. Measuring this is not a day-to-day activity, it is one best seen when taken over time. Developed world markets are measured on short-term bases sad to say, because this focuses on individual’s performances not on the investments themselves. Such attitudes obscure real value.

It also ignores the underlying fundamentals that are pointing to tremendous turbulence throughout global financial markets, in the coming months, as interest rates are raised.

Governments do see gold as competing with currencies but once currencies lose user’s respect people and nations will turn to gold to support their currencies, but firmly behind their currencies, not as an alternative.

There were no purchases or sales from or to the SPDR gold ETF or the Gold Trust yesterday. This leaves the holdings of the SPDR gold ETF at 682.595 tonnes and 161.17 tonnes in the Gold Trust
Julian D.W. Phillips for the Gold & Silver Forecasters – www.goldforecaster.com and www.silverforecaster.com

More market volatility ahead as gold season draws near

On Thursday New York closed at $1,124.30 up $0.20. The dollar was stronger at $1.1246 at the close up from $1.1335, against the euro, with the dollar Index stronger at 95.76 up from 95.19 yesterday. This morning the LBMA gold price was set at $1,125.50 down $3.00. The euro equivalent was €997.61 down €1.42. Ahead of New York’s opening, gold was trading at $1,127.55 and in the euro at €998.51.  

The silver price closed at $14.45 up 27 cents over Thursday’s close in New York. Ahead of New York’s opening today it was trading at $14.45.

Price Drivers

The financial markets across the world are recovering this morning. We are fully aware that valuations remain higher than they should be in developed world markets and the elements that caused the volatility and sudden falls, remain in position.  This implies that we have not seen the end of such volatility and perhaps we could see worse in the future. The volatility of this week has damaged confidence in financial markets and this will be remembered for some time. Markets have not reacted in a ‘reasoned way’ but essentially were the victims of traders driving prices down setting off panic across the world. They are not efficient markets anymore!

What was most disturbing was the weakness of the dollar, then its recovery. Such market volatility is not expected in the world’s most important currencies. The three fingers pointing back from the finger pointing at China’s devaluation highlight that the dollar and euro swung much more in the last week than has the Chinese Yuan.  The brutality of these moves makes a mockery of buying and selling of items priced in these currencies.

It would now be reasonable to title these times as ‘extreme’.

As September approaches we see European holidays coming to an end. The Europeans tend to go on holiday at the same time, for the entire month of August. In India, it is close to harvest time and the reaping of profits from a reasonable Monsoon. With eyes on the festive season on both sides of the world, we are close to the beginning of the ‘gold season’ now.  

There were purchases of 1.49 tonnes into the SPDR gold ETF but none into the Gold Trust yesterday. This leaves the holdings of the SPDR gold ETF at 682.595 tonnes and 162.07 tonnes in the Gold Trust

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

Gold has behaved remarkably steadily in the face of global market turmoil

It is important to get a balanced perspective on the global financial market actions in the last few days because we tend to be emotional when such volatility happens. First, the Shanghai Stock Exchange has been treated as a casino where investments are expected to yield short-term trading gains [with government backing]. When China moved to float the Yuan the ripple set off global reactions. Government stepped in to try to show its support even allowing Pension funds to invest in the market [they have yet to do so].  In backing off support for the equity market, China removed support for short-term traders.

Please note the Shanghai exchange does not impact the Chinese economy but it is a side market that is not taken as seriously as it is in the developed world. Far more important is the capital liberalizing process at Municipal level where capital injections do reach the overall economy.   The process of removing Capital Controls in China is set to see a cheaper Yuan, but in the process enhance the Yuan’s relevance in the global monetary system.

What is most disturbing is that the Chinese equity market action should have set off sell-offs in the developed world! This tells us that the influence of short-term trading [prompted by demands for performance] is excessive in the developed world. Market liquidity is insufficient to prevent high frequency trading from creating the huge volatility that we have seen this week.

As for gold being part of this scene, it hasn’t been. It has behaved remarkably steadily in line with chart patterns. Gold is for long-term investing mainly, as we have seen this week.

Of more importance to the gold price is the approaching ‘gold season’ beginning next month.

There were no purchases or sales into or from the SPDR gold ETF or the Gold Trust yesterday. This leaves the holdings of the SPDR gold ETF at 681.105 tonnes and 162.07 tonnes in the Gold Trust.  –

Gold and Silver markets

On Wednesday New York closed at $1,124.10 down $15.40. The dollar was stronger at $1.1335 at the close up from $1.1496, against the euro, with the dollar Index stronger at 95.19 up from 94.10 yesterday. This morning the LBMA gold price was set at $1,128.50 down $5.90. The euro equivalent was €999.03 up €8.98. Ahead of New York’s opening, gold was trading at $1,126.40 and in the euro at €998.67.  

The silver price closed at $14.18 down 46 cents over Wednesday’s close in New York. Ahead of New York’s opening today it was trading at $14.24.  Silver is seen as turning positive now.

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