Gold part of the fabric of Indian society

 Gold Today –New York closed at $1,248.90 yesterday after closing at $1,258.70 Wednesday. London opened at $1,248.20 today. 

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

         The $: € was slightly stronger at $1.1120 after yesterday’s $1.1131: €1.

         The Dollar index was stronger at 97.73 after yesterday’s 97.57

         The Yen was weaker at 111.25 after yesterday’s 110.77:$1. 

         The Yuan was weaker at 6.8929after yesterday’s 6.8902: $1. 

         The Pound Sterling was weaker at $1.2950 after yesterday’s $1.3036: £1.

Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    5    19

     2017    5    18

     2017    5    17

SHAU

SHAU

SHAU

280.67

277.51

Trading at 279.75

280.6

277.63

$ equivalent 1oz at 0.995 fineness

@    $1: 6.8929

       $1: 6.8814

       $1: 6.8919     

  /

$1,263.61

$1,254.33

/

$1,263.29

$1,254.87

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 trading level towards the close translates into $1,257.34. New York closed at a $8.44 discount to Shanghai’s close yesterday. London opened at a discount of $9.14 Shanghai’s close today.

As you can see above, Shanghai did not pull back today as far as New York did.  With Shanghai now proving less volatile than London or New York we expect the pattern being formed now will lead to Shanghai giving a better indication of the direction of the gold price. At the moment that is higher, after this consolidation.

Silver Today –Silver closed at $16.61 yesterday after $16.89 at New York’s close Wednesday.

LBMA price setting:  The LBMA gold price was set today at $1,251.85 from Thursday’s $1,261.35.  The gold price in the euro was set at €1,120.68 after yesterday’s €1,135.02.

Ahead of the opening of New York the gold price was trading at $1,253.00 and in the euro at €1,121.55. At the same time, the silver price was trading at $16.80. 

Price Drivers

With the gold price shrugging off potential falls, we now expect to see it trade in a tightening range until the gold market is in balance, before the next strong move either way.The dollar is slightly stronger today in what is a normal market reaction, but we do not expect this to last for long.

India & GST

While the list of GST levels to be imposed in July has now been issued, the duty to be levied on gold [and services] is still to be finalized.  It is expected to be 3%.

When we look back at the actions of Modi and his government in India and on gold, since he came to power, we see that Indian governments are still unhappy with gold in the country and will always be. This is not a small problem for that government, when you consider that the total gold holdings of the world’s central banks is around 34,000 tonnes, private citizens and institutions in India hold around 24,000 tonnes, an amount that is rising by around 1,000 tonnes a year.

Why their dislike? Because gold lies outside government control, just as it did in the U.S. before it was confiscated in 1933. Thereafter, when all U.S. citizens could only use banknotes and the banking system, the U.S. government completely controlled the financial system. All governments need to do that if they want total control of a nation’s finances, despite any objection from their own people.

Every attempt to pull the Indian gold trade into the Indian banking system [as it is in the west] has failed and will continue to fail because of the financial mistrust between the government and its citizens.

But gold in India is far more to its citizens, than it was to U.S. citizens, prior to 1933. In India, it is tied in with religion, family as well as financial security. It is part of the fabric of society. This is unlikely to change in the future. It is unlikely, that any ban on gold dealing there would work because it didn’t work in the past.

So the expected 3% GST level being mooted in India is simply expected to incite more black market activity including making extremely profitable the business of smuggling of gold into the country

Gold ETFs – Yesterday, saw sales of 1.184 tonnes from the SPDR gold ETF (GLD) but purchases of 0.53 of a tonne into the Gold Trust (IAU). Their holdings are now at 850.891 tonnes and at 202.82 tonnes respectively.

Julian D.W. Phillips 

 GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance