Gold recovery continues from Monday’s flash crash

Gold Today –New York closed at $1,249.10 yesterday after closing at $1,244.30 Monday. London opened at $1,253.00 today. 

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

         The $: € was much weaker at $1.1358 after yesterday’s $1.1256: €1.

         The Dollar index was weaker at 96.36 after yesterday’s 96.97

         The Yen was weaker at 112.36 after yesterday’s 111.77:$1. 

         The Yuan was stronger at 6.8036 after yesterday’s 6.8145: $1. 

         The Pound Sterling was stronger at $1.2810 after yesterday’s $1.2748: £1.

Yuan Gold Fix
Trade Date     Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    6    28

     2017    6    27              

     2017    6    26

SHAU

SHAU

SHAU

/

275.63

278.15

Trading at 276.80

276.41

278.03

$ equivalent 1oz at 0.995 fineness

@    $1: 6.8036

       $1: 6.8145

       $1: 6.8427     

  /

$1,253.06

$1,259.33

Trading at $1,260.42

$1,256.52

$1,258.78

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 three global gold markets are moving back into line today with London and New York rising to almost Shanghai’s level. New York rose to within $7.32 of Shanghai’s prices down from $16 lower than Shanghai, and London opened $7.42 lower lifting the discount to Shanghai, from $13.42. This is again, confirming Shanghai dominating pricing power.

The Yuan continues to strengthen as you can see above. The Shanghai gold price is moving independently of the Yuan’s exchange rate.

Silver Today –Silver closed at $16.68 yesterday after $16.57 at New York’s close Monday. Today, silver is telling us it wants to rise. Is it leading the way for gold?

LBMA price setting:  The LBMA gold price was set today at $1,251.60 from yesterday’s $1,250.40.  The gold price in the euro was set at €913.58 after Friday’s €1,111.17.

Ahead of the opening of New York the gold price was trading at $1,252.80 and in the euro at €912.45. At the same time, the silver price was trading at $16.84. 

Price Drivers

The IMF has cut U.S. growth forecast to 2.1% from 2.3% in 2017 with a declining growth rate in the years following, due to the U.S. having trouble adapting to trends such as changes to the job market from technology, low productivity growth and an aging population, the IMF said, noting that household incomes are stagnating for a large share of the population.

At the same time Draghi of the E.C.B. has indicated that it looks like the E.U. has turned the corner for the better after fears over the last couple of years are dissipating and he is considering reducing the stimuli currently in operation in the E.U. The immediate result has been for the euro to begin to rise strongly. If the euro rises through $1.17 we should see it beginning to soar against the dollar.

As we move to a world where a multi-currency system is coming into being we watch for evidence that confirms that. To many, Brexit is clearly a separation of the U.K. from the E.U. The U.K. will, as it has done for the last century, will remain very close to the U.S. Alongside this we see a growing distance on the monetary front between the E.U. and the U.S. We expect to see this in the €: $ exchange rate. In the past the rate peaked at $1.40. It is important that the previously assumed relationship between gold and the dollar was largely based on the €: $ exchange rate. That has clearly broken down as the euro rises and gold continues to consolidate around the $1,250 area. The strength of the euro has taken the euro price of gold down below €1,000

We note that the gold price has almost recovered in the dollar from the 56 tonne sale at the beginning of the week. This has confirmed our conclusions in yesterday’s report. Some respected advisors put forward the idea that it was Venezuela doing the selling. That could not be so because Venezuela would sell physical and not in one batch. This was a “paper” futures sale involving no physical gold. That’s why the gold price has recovered.

One of the important factors in the gold price comes from dealers. To understand the gold price one cannot ignore the pricing by dealers of gold. This happens usually without actual gold sales or purchases.. As we said yesterday “… physical dealers move prices higher for fear of more physical gold buying…” They drop prices if they fear sales. This adds to the volatility of the gold price and further illustrates the differences between Shanghai, where high liquidity and the absence of market dominant dealers contrasts with London and New York where the bullion banks act as dealers.

Gold ETFs – Yesterday saw no purchases or sales of gold from the SPDR gold ETF but purchases no change in the Gold Trust. Their holdings are now at 853.684 tonnes and, at 208.41 tonnes respectively.

Julian D.W. Phillips 

 GoldForecaster.com | StockBridge Management Alliance 

 

 

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Muted effect on gold from Macron victory in France

 

Gold Today –New York closed at $1,229.30 Friday after closing at $1,239.50 Thursday. London opened at $1,230.00 today. 

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

         The $: € was weaker at $1.0973 after Friday’s $1.0964: €1.

         The Dollar index was weaker at 98.73 after Friday’s 98.83

         The Yen was weaker at 112.68 after Friday’s 112.23:$1. 

         The Yuan was weaker at 6.9035 after Friday’s 6.8994: $1. 

         The Pound Sterling was stronger at $1.2975 after Friday’s $1.2935: £1.

Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    5    8

     2017    5    5

     2017    5    4

SHAU

SHAU

SHAU

/

274.53

277.91

/

275.73

276.41

$ equivalent 1oz @    $1: 6.9035

       $1: 6.8994

       $1: 6.8949

      

  /

$1,237.62

$1,253.68

/

$1,243.03

$1,246.17

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 was trading at 275.6 towards the close today. This translates into $1,236.71. New York closed at a $7.41 discount to Shanghai’s close yesterday. London opened at a discount of $6.71 to Shanghai’s close today.

Arbitrageur margins are tight at around $7 so, we see the global gold market prices very close, as they all move down roughly in line with each other.

LBMA price setting:  The LBMA gold price was set today at $1,229.70 from Friday’s $1,239.40.  

The gold price in the euro was set at €1,124.45 after Friday’s €1,130.99.

Ahead of the opening of New York the gold price was trading at $1,230.30 and in the euro at €1,124.07. At the same time, the silver price was trading at $16.33. 

Silver Today –Silver closed at $16.38 Friday after $16.47 at New York’s close Thursday.

 Price Drivers

The Macron victory implies that the E.U. will hold together in the future and that the euro will not collapse. While Italy remains uncertain on the subject, it is not enough to curb the optimism that pervades markets this morning.

What is uncertain is the ability of the French President, without a political party behind him, to govern effectively. Will he try to rule by government decree? We will have to wait until mid-June and the Parliamentary elections to see if he can establish a majority and govern, or if he will simply become a figurehead.

The gold price had discounted this result so there are no major moves taking place in Europe. The dollar continues to weaken which should mean higher gold prices, but, of late, the gold price has been slipping with the dollar. Will the $1,230 level hold or will we see more slippage to around $1,220 where strong support sits.

What we did see early in the day was an attempt to drive the gold price down by the selling of $300 million of gold futures early in Europe’s day. It failed to break the gold price down which was then seen as recovering to the mid-$1,230 area.

London Vault Holdings to be published soon.

The LBMA and the LPMCL announced that from summer 2017 the LBMA will be publishing the gold and silver physical precious metals holdings of the London vaults, with the platinum and palladium holdings to be published at a later date.

The data only includes physical metal held within the London environs and does not include precious metals physical holdings readily available at short notice in other secure overseas vaulting facilities.

Gold ETFs – Friday saw no change in the SPDR gold ETF but the Gold Trust saw sales of 1.34 tonnes. Their holdings are now at 853.075 tonnes and at 201.69 tonnes respectively.

 Julian D.W. Phillips 

 GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

Gold and Silver Markets: Real and Present Dangers

Gold Today –The New York gold price closed Tuesday at $1,187.80 down from $1,190.20 down $2.40. Ahead of London’s opening, prices were quoted at $1,185. As London opened the gold price hovered around $1,183. Then the LBMA set it at $1,183.40 down from $1,188.90 down $5.50 with the dollar index almost the same at 96.12 down from 96.04 on Tuesday. The dollar continues weak against the euro at $1.1260 up from $1.1285 against the euro on Tuesday. The gold price in the euro was set at €1,050.98 down from €1,053.20. Ahead of New York’s opening, the gold price was trading at $1,183.65 and in the euro at €1,051.15.  

Silver Today –The silver price in New York closed at $15.23 down 8 cents at Tuesday’s close.  Ahead of New York’s opening, the silver price stood at $15.16.

Price Drivers

Today, we are seeing gold trying to retreat at London’s opening. With gold putting in a sterling performance of late a consolidation period is to be expected as resistance approaches. There are quite a few ‘stale bulls’ above $1,200. Just how fast gold manages to break through overhead resistance will tell us what lies ahead. Softening this view is the reality that the amount of gold at this level, even in the hands of these stale bulls appears limited and China continues to draw in as much as it can.

This morning, with the exception of China, which is closed for the week, equity markets continue to fall with Japan now fully in a ‘bear’ market. The dollar continues to fall against major currencies, particularly the Yen which is now at 114 to the dollar.  All the gains made through weakening their currency are beginning to evaporate. While it doesn’t signal a return to a yen below 100 to the dollar it does signal an end to ongoing competitive devaluations against the dollar. It also signals considerable uncertainty in currency markets looking ahead. We see this in the big tsunami of unwinding by the “carry” trade and sending money from whence it was borrowed.

In the absence of a ‘dollar bull’ market economic fundamentals have to kick in. That’s why financial storms are threatening in 2016. Today’s selling of banking stocks is part of this uncertainty. Can they pay their debts is the question uppermost in market minds. To be fair to the banks, global equities are falling because of a darkening financial future across the world. That’s why the mood is moving towards gold and silver and we are only just at the start!

On Bloomberg today you will not an article reporting that ‘big’ banknotes [€500] are to be banned to prevent crime. While a noble intention, what are the other effects? The biggest is that more transactions will be pushed through the banking system under government’s control. It will reduce the cash market for individuals. With the drug world as successful as ever in moving money around such security actions to date have been ineffective so this restraint on cash has the greatest impact on the public. ‘Big Brother’ is closer! Of course, gold nationally, is open to such controls, but internationally no local controls are ever fully effective. The world is too divided to exert a unified control over gold, but it is vulnerable locally.  

Tuesday saw a sale of 1.487 tonnes from a trader who, in the past buys and sells similar amounts each time. To do so now is to be expected for the gold price has roared up $150 almost without a break, reaching overhead resistance at $1,200.  There were no sales or purchases into or from the Gold Trust. The holdings of the SPDR gold ETF are now at 702.031 tonnes and at 173.78 tonnes in the Gold Trust.

Silver will mark time waiting for gold’s lead.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

Gold to bounce off support; China launches interbank gold trading

The New York gold price closed Monday at $1,089.60 down from $1,095.00. In Asia it was moved down to $1,081.5 but London held it there and the LBMA price was set at $1,081.80 down from $1,094.85 with the dollar index higher at 99.25 up from 98.94 on Tuesday. The euro was at $1.0817 down from $1.0856 against the dollar. The gold price in the euro was set at €1,000.09 down from €1,008.52. Ahead of New York’s opening, the gold price was trading at $1,082.55 and in the euro at €1,000.51.  

The silver price in New York closed at $13.81 down 7 cents.  Ahead of New York’s opening the silver price stood at $13.83.

Price Drivers

Monday saw no purchases or sales into or from the SPDR gold ETF or the Gold Trust. The holdings of the SPDR gold ETF are now at 651.677 tonnes and at 160.17 tonnes in the Gold Trust.  

We find it extraordinary that the gold price can slip from over $1,100.00 to $1,081.00 with almost no physical gold sales! And this after a few weeks where strong gold purchases pushed the gold price through resistance. The gold price is now sitting on support that was previously resistance. If the market really does work, we expect to see gold bounce off support. Today, more and more attention is being brought to the currency world and exchange rates. The dollar is stronger today, which is why dealers marked the gold price down, but we reiterate that gold is moving in all currencies, both up and down.

There are moves afoot to adjust the malfunctioning of the global gold market structurally. We are waiting for the Chinese bank ICBC to be accepted as a Member of the LBMA price setting group of banks and for them to be accepted as a gold clearing bank. This may well bridge the divide between east and west in the gold market. We are curious to see just how long the LBMA takes to appoint the ICBC as members and clearers. Because of the implications to pricing power, we do expect the process to be dragged out. If it happens quickly, it is all credit to the LBMA. What may well weigh the speed of their appointment is the reality that London wants to remain the hub of Yuan trading in the west and likely keep it influence in the gold market intact.

China has launched interbank gold trading at the beginning of this year, in an effort to open up the country’s bullion market. It is aimed at increasing liquidity in interbank gold trading, and promote market making. Before the new mechanism, banks were not allowed to trade gold with each other and could only buy the precious metal through the Shanghai Gold Exchange, which is the world’s biggest physical trading platform for the metal.

The silver price will continue to be hesitant until gold resumes it rise.         

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

LBMA Conference feedback – PGMs and irresponsible reporting on diesel

Day 2 of the LBMA conference in Vienna and one of the most interesting presentations, given perhaps no-one else had anything good to say about pgms and platinum in particular, was one from Peter Duncan of Johnson Matthey.  He described recent media reporting on diesel powered vehicles, particularly in the light of the recent VW emissions testing manipulation scandal, as being both irresponsible and irrelevant.  Irresponsible because most of the problems highlighted in the media are being addressed by the manufacturers and the regulators, and irrelevant as diesel powered vehicles are absolutely essential for the automotive sector to meet greenhouse gas emission standards.

Read more on Sharpspixley.com:

LBMA: Media coverage of diesel emissions irresponsible and irrelevant

LBMA conference feedback – far from optimistic for gold!

Well, the first full day of this year’s LBMA/LPPM conference is now behind us as delegates leave the conference venue at the Vienna Hilton hotel to attend the conference dinner at the Liechtenstein Garden Palace, but there is little else to be of good cheer about given the general opinions of the speakers at the event.  Gold has now effectively been in a bear market for the past three years, despite a bit of a pick-up over the past month, but most of the speakers so far seem to expect precious metals to resume their downward trend.  Indeed three out of the four members of a conference panel on gold investment – and the panel moderator – all reckoned that not only would the gold price continue to fall, but that it could continue its decline for at least a couple more years and head down towards the $800 an ounce level.

As I pointed out in an article on this published on sharpspixley.com – LBMA: Little cheer for gold investors from LBMA conference panel this was extremely similar to the consensus of a panel discussion on paper gold at the Denver Gold Forum a month ago at a time when virtually every bank analyst was predicting falls down to $1,000 and below, but ever since then the gold price has continued to confound, and is currently some $40 higher than it was at the time of the Denver event.

But talking to delegates in Vienna, who mostly come from what might be considered the more realistic side of the gold sector rather than from the mining companies, which in effect tend to be optimists just to be involved in the mining business at all, there would seem to be few dissenters from the panel’s consensus view.  If you are a contrarian now may well be the time to buy!

So what is there that might be going for the gold price?  Global political developments – particularly in the Middle East, but also in Eastern Europe and southeast Asia – have the potential to flare up.  Eurozone finances are still fragile.  There are elections due in a number of countries which could impact global gold supply.  Beware of ‘unknown unknowns’ as one speaker at the LBMA conference noted.  There also appears to be a strong degree of support for the metal if it falls below $1,100, although perhaps this hasn’t really been tested.

Also Chinese demand, as expressed by the Shanghai Gold Exchange (SGE) deliveries level, which has already exceeded 2,000 tonnes year to date, and is 300 tonnes higher than at the same time as in the record 2013 year (See: Shanghai gold deliveries surpass 2,000 tonnes already this year) needs to be taken into account.  These figures may well be enhanced by gold demand from the financial sector, which isn’t included in the consumption assessments by the major precious metals analytical consultancies, but nonetheless still takes gold off the markets – unless or until it this financial  element is liquidated or otherwise unwound.

We have come across the occasional opinion here, though,  which is gold supportive, seeing further improvement in the price by the year end and a continuation of this trend in 2016 – but this hasn’t tended to be the consensus.  Perhaps we’ve just been talking mostly to the gold pessimists!

So perhaps the gold outlook isn’t quite as dismal as one hears for the most part here in Vienna – but then those looking for a continual price fall are mostly seasoned gold traders and analytical veterans so their views certainly can’t be dismissed.  Indeed many profess to be gold believers overall, but are still looking for short to medium term falls.

Bank of China joins LBMA gold benchmark setters

Bank of China joins LBMA gold benchmark setters

The big news today is the participation of the Bank of China amongst the group of banks which set the LBMA London gold price benchmark.  Julian Phillips comments on the gold price drivers.

New York closed yesterday at $1,186.20 up $5.20.  Today sees the dollar weaker at $1.1265 down half a cent with the dollar index weaker at 94.97 down from 95.28. The LBMA Gold Price was set at $1,182.10 up $3.85 from a day earlier with the equivalent euro price at €1,050.24 down €3.74. Ahead of New York’s opening, gold was trading in London at $1,183.50 and in the euro at €1,051.11.

The silver price rose to $16.11 up from$15.94 in New York. Ahead of New York’s opening it was trading at $16,03.

The biggest news of the day for gold is the addition of the first Chinese bank to the LBMA Gold price setting members. The Bank of China is the new member. Bank of China’s direct participation in the gold auction would reinforce the connection between the Chinese domestic market and overseas markets, making the international gold price better reflect the supply and demand in China, and help to promote the internationalization of the Chinese gold market. We would expect more Chinese banks to join to make the hopes of the Bank of China come true. It would represent the start of the shift in pricing power to Shanghai, we believe.

There is no basis for agreement between the E.U. and Greece it seems.  Weighing up the factors on both sides, we see the E.U. having considerably more to lose than Greece now. The head of Airbus is extremely happy with the orders Airbus achieved at the Paris Air show and attributed its success in no small part to the euro’s exchange rate with the dollar. If that had been at $1.40, what would it have cost this company alone? Here is where the potential loss to the E.U. lies! Add geopolitical factors and we would think the stakes are far higher than just the accountants and finance ministers concerns.

The remarkable feature of the Greek debt crisis is that markets across the world are moving according to the state of those negotiations, at least that is what the media tells us. If this is true, we ask why? Is it because the expected damage to the currency world is far greater than we are led to believe? If the exit of Greece from the Eurozone is to have a global impact, it will be seen in the currency world leaving it in a state of turbulence. With the globe’s two most important currencies gyrating against each other thereafter, the economic ramifications are far larger than so far stated.

Bear in mind that these two currencies and trading blocs have satellite, trading nations that supply them, who move their own currencies against these two. China is included in this group, so far, but its objective is to be the third and independent major global currency that won’t fit into the current world monetary system except on terms that suits it alone.  The subsequent monetary turbulence that is coming, no matter what, will reshape the global monetary system and gold will be needed to temper the turbulence thereafter.

There were sales of gold from the SPDR gold ETF of 2.087 tonnes of gold on Monday. The holdings of the SPDR gold ETF are at 701.897 tonnes and at 167.01 tonnes in the Gold Trust.

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

 

New York still setting gold price although bulk of trade is through London

New York still setting gold price although bulk of trade is through London

Julian Phillips’ latest analysis of what is happening in the immediate gold and silver markets and of what is really driving the price movements.

New York closed Monday at $1,225.30 up 40 cents over Friday’s close. Asia and London let it slip. The LBMA Gold price was set at $1,219.65 down $8.50 over Monday’s level. The euro equivalent stood at €1,089.12 up €11.89 while the dollar was stronger and the euro weaker at $1.1198 down from $1.1401 against the euro. Ahead of New York’s opening, gold was trading in London back over $1,220 and in the euro at around €1,090.

The silver price closed at $17.68 up 15 cents on Friday’s level. Ahead of New York’s opening it was trading at $17.40.

Yesterday saw sales of 5.668 tonnes of gold from the SPDR Gold ETF but nothing from the Gold Trust. The holdings of the SPDR gold ETF are at 718.243 tonnes and at 166.14 tonnes in the Gold Trust.  These were heavy sales and, we suspect from the same sellers that sold the heaviest tonnage since early 2015 in the last week and more. The sales were large enough to restrain the gold price but not to pull it down.  This is what the consolidation of the gold price is all about.

The dollar index is stronger at 94.88 up from yesterday’s 93.60.  The euro is much weaker today at $1.1090 after yesterday’s $1.14o1 and remarks from the ECB that they will increase QE in months when liquidity is low in holiday months. Is the correction over? Perhaps it is and as we said yesterday the market expectation and ours is that we will see the euro eventually at $1.

The gold market is moving because of currency issues now. But in time the gold price, as it has done of late, walks its own road and rises in the euro too and often in the dollar, at the same time. Gold will move against all currencies and is not linked to a specific currency. But when the market allows it will follow a currency.

This brings us to the concept of pricing power, once more. It is apparent over the years of this century that New York, where a small amount of physical gold is traded, the gold price is ‘made’. London where around 80% of the globe’s market traded physical gold is traded, has a smaller say in the matter. The bulk of gold traded outside the market usually on contracts or with central banks, has no say in the gold price. Instead it is convenient to refer to the New York or London price [currently the twice daily LBMA Gold Price] as a price on which the contract price will be based. The question is, “Do New York’s prices or even London’s prices represent true demand and supply?” No is the answer! Markets that genuinely do this may be called perfect because academically we would like to see this, but in the bulk of markets it is only the marginal supply and demand that prices the product along with speculators, day traders and dealers. Gold and silver are no exception. Until a credible alternative pricing mechanism is established that contractors and dealers accept, the markets in silver and gold will remain imperfect. With the Yuan contract “Fixing” in Shanghai coming this year, will that price become the alternative? Let’s see?

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

Will gold fix in yuan take over from London?

Julian Phillips’ latest gold and silver market commentary and what he sees as the main market drivers with Indian imports running at high levels

New York closed at $1,188.80 on Monday. Asia held it there and so did London. The LBMA Gold price was set at $1,187.40 up $8.40 on Friday. The euro equivalent stood at €1,070.69 up €23.62 while the dollar was stronger at $1.1090 up from $1.1260 against the euro. Ahead of New York’s opening, gold was trading higher in London at $1,187.60 and in the euro at €1,069.09.

The silver price closed at $16.42 up 26 cents on Friday’s level. Ahead of New York’s opening it was trading at $16.40.

Yesterday saw very little gold trading done in New York with London closed for the Bank Holiday. The dollar is rising today with the dollar index at 95.80 up from 94.64 yesterday as did the dollar at $1.1084 from Friday’s $1.1269. There were purchases of gold into the SPDR gold E.T.F. of 2.389 tonnes on Friday but none yesterday and none from or into the Gold Trust on Friday or Monday. The holdings of the SPDR gold ETF are at 741.750 tonnes and at 165.58 tonnes in the Gold Trust.

With the dollar’s correction now seemingly over, we expect to see it rise against all currencies again. This time it is possible to see the dollar reach $1: €1. But other currencies such as the Yen may fall further against the dollar.

Indian imports of gold in the first quarter of the year has been reported as up by 19.5% for the 2014-15 year, according to the Reserve Bank of India. Bullion imports rose to $34.32 billion for the 2015 year ending in March, up from $28.7 billion imported in the fiscal 2014. This is roughly 900 tonnes in the last year against roughly 750 tonnes in the previous year. Please note that these figures exclude smuggled gold, which could be 250 tonnes +.

The rise in imports is moving faster now as confirmed by the Commerce Ministry, which reported imports nearly doubling in March to $4.98 billion or roughly 130 tonnes. The implication of this figure, if imports continue to rise throughout the year at this pace, could lead to imports hitting 1,200 tonnes, excluding smuggled gold. While duties of 10% persist, smuggled gold will continue to pour in, particularly if the developed world markets hold prices around the $1,200 level.

Taking Chinese demand at the level we saw last year together with Indian demand, we see a figure way above total newly mined production levels. Add all Asian demand and Middle Eastern demand and we see them taking all available gold in the markets if prices remain down.

This adds a large question mark over using the LBMA Gold price as a reference price for gold contracts. Later in the year we will see a Yuan Gold Fix. If that comes in at a higher level, when translated into dollars, we wonder if the Yuan gold Fix will be used as the reference price for contracts?

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

London Bullion Market Association Launches Strategic Bullion Market Review

LBMA Press Release
The London Bullion Market Association has commissioned EY to undertake a study of the
London bullion market and to prepare recommendations for the continued development of
the market. The aim of this strategy work is to identify opportunities for market efficiency
and evolution, while increasing transparency and liquidity in line with the Fair and Effective
Markets Review (FEMR) launched by the Bank of England, HM Treasury and FCA which is
due to report in June. In August 2014, FEMR made recommendations to regulate a further
seven major UK based benchmarks, including those for the LBMA Gold and Silver Prices,
which subsequently became regulated.
Within the core parameters of enhancing liquidity and transparency, the study will consider
a range of options for the benefit of the bullion market.
“I invite participants from the global bullion market to engage in the LBMA’s Strategy
Study. EY brings momentum and independence to this work which started in 2014,” said
Ruth Crowell, CEO of the LBMA. “We’re looking forward to receiving the report in the
summer and sharing the recommendations and findings with Members and global market
participants.”
Martin Watkins, FinTech Director and EMEIA Co-Head of Exchanges and FMI at EY,
comments “Many of the most exciting advances in technology are coming from the London
fintech market. In order to make sure that London remains central to the international
precious metals market and that the existing liquidity is maintained or enhanced, it’s going
to be important to assess how the rapid evolution of trading technology and the rampant
innovation in fintech can be leveraged for the good of the market and drive the future
evolution of the LBMA and the wider London bullion market.”

JP Morgan joins the ‘Usual Suspects’ in LBMA gold benchmarking process

The ICE Benchmark Administration website now shows that JP Morgan Chase has become the seventh Direct Participant in setting the twice daily LBMA Gold Price benchmarks – a selection which will be indeed inflame those gold price manipulation-believers who reckon that JP Morgan and Goldman Sachs are behind almost any irregularity in global financial markets.

Lawrie Williams

If any selection could be seen as inflaming the gold price manipulation-believers, it would be the addition of JP Morgan as one of the new participants in the LBMA Gold Price benchmarking process.  And guess what?  ICE Benchmarking Administration (IBA), which runs the new benchmarking process, confirms that indeed JP Morgan has joined the Direct Participants in the new benchmarking process – not by any announcement, but just by the inclusion today of JP Morgan Chase on its website as being among the members of the panel which now sets the twice daily London benchmark gold price to replace the old Gold Fix.

So the original four members of the old London Gold Fixing panel – Barclays, HSBC, Scotiabank and SocGen – have now been joined by Goldman Sachs, JP Morgan and UBS as the Direct Particpants which now set the new gold price benchmarks.

Before the new panel of Direct Particpants was finalised it had been widely believed that one or more of the Chinese banks – Bank of China, ICBC and China Construction Bank – would be among the new members – a speculation which was never squashed by the LBMA – and right up to the first application of the new electronic benchmarking process a week ago many believed that indeed one or more of these three banks would indeed be involved in the process. It was not to be, although all of them would appear to meet the qualification terms for Direct Participants (Ordinary Member accreditation from the LBMA; Individuals with appropriate experience, skill and training; Organisational and governance arrangements; Appropriate credit lines, or equivalent arrangements; Clearing/settlement arrangements with existing Direct Participants) and it had been announced that the three Chinese banks had indeed expressed interest in being among the first Direct Participants.  Why none have become involved so far has not been made apparent.

If the reason for replacing the almost century old gold price benchmarking process had been brought about because it was beginning to be seen as being potentially open to price manipulation by the participants, something which is totally unproven and has always been hotly denied, then the selection of the banks which had formerly been involved as partipants in the new process, plus Goldman, JP Morgan and UBS, seems to have just been a red rag to those gold bulls who believe the gold market is indeed manipulated.  The new LBMA Gold Price participants are viewed by this price manipulation-believing sector as being those who are already probably most involved in finacial manipulation of the system.  They will now reckon that this just confirms their belief.  JP Morgan and Goldman Sachs in particular are very much the betes noires of the manipulation believers.  And they will also see the apparent freezing out of the Chinese banks as just confirming their viewpoint.

Thus one suspects the manipulation-believers will remain up at arms over the new London gold benchmarking system until the number of Direct Participants is broadened to include some members who are seen as being outside the current western financial elite.  And even if this happens, they will still undoubtedly find other points to criticise.

 

Is the new LBMA Gold Price just another Fix? $1171.75 the first new benchmark price

The first LBMA Gold Price benchmark price has come in at $1171.75, but the make-up of the price setting participants continues to raise questions.

The new LBMA Gold Pricing benchmarking process came into effect today and the 10.30 am price set under the new system was $1171.75 – but the make-up of the initial direct participants in the new ‘fix’ is somewhat mired in controversy.

Many had believed the number of direct participants would be expanded into double figures and include at least one Chinese bank – or possibly even three – among its numbers.  In the event it appears that the direct participants in setting the LBMA Gold Price, as it is now called, comprise the four banks which were involved in the old London Gold Fix, plus two more only (Goldman Sachs and UBS) – and no sign of any Chinese involvement.  In a prior article on Mineweb.com – I had commented that it was by no means certain that there would be any Chinese participation at the start – see: Fixing the Gold Fix – with or without the Chinese banks?, which obviously has proved correct.   The fact that, in the event,  by far the world’s biggest gold consumer – whatever the World Gold Council and GFMS may say in their analyses, which uses a very limiting definition of consumption – should not be involved in the new benchmarking process may well indeed be seen as a ‘fix’ in the worst connotations of that word in  modern parlance.

We do assume though that there will be sufficient pressure on the London Bullion Market Association (LBMA), which owns the intellectual property to the London benchmarking process, and ICE Benchmarking Administration (IBA), which is handling the mechanics of the process, to involve participation by one or more of the three Chinese banks which have expressed interest in being involved and would appear to meet the strict qualification terms imposed.  These are the Industrial and Commercial Bank of China (ICBC), the Bank of China, and China Construction Bank.  The first of these is the world’s largest bank in terms of assets and it seems to an outside observer that it is inconceivable that any true new gold price benchmarking system should not at least include the world’s biggest bank from the world’s largest gold consuming and producing nation.  Outside observers may also well reckon the selection of the new process participants does indeed comprise a ‘Fix’ in order to try and maintain the status quo for as long as possible.

Indeed the LBMA and IBA have been remarkably tight-lipped so far about the selection process for the new LBMA Gold Price participants, or even as to who was going to be the ‘chairman’ of the benchmark setting group (despite this being supposedly a fully electronic process).

So why are no Chinese banks involved?  Undoubtedly the LBMA/ICE will come up with some spurious technical reason which has so far delayed any Chinese inclusion and that they will be working towards some Chinese involvement – but exactly when this might occur will probably be unspecified.  There may undoubtedly be a fear that once the Chinese banks are involved, the Western bullion banks which have set the London gold price benchmarks for nearly 100 years, will eventually lose control of the process and the Chinese will come to dominate it given the seemingly ever-growing demand for gold there and in other Asian nations and the huge physical gold flows from West to East.

 

 

The new London Gold ‘Fix’ being implemented with undue haste?

The announcement that the new LBMA Gold Price benchmarking system will commence in March this year may bring this in sooner than might be considered ideal.  Is the LBMA worried about potential competition from Asia in the setting of a new global gold benchmarking system?  Check out full article on http://www.mineweb.com/news/gold/new-london-gold-fix-undue-haste/

Lawrence Williams

Some additional details have now been announced regarding the replacement for the London Gold Fix.  The new electronic system which is to replace the Fix is to be named The LBMA Gold Price (although one suspects that the media may continue to call it the London Gold Fix) and the new system is due to be implemented at a so far unspecified date in March this year.

An announcement from the company selected to handle the new London benchmark pricing process, Intercontinental Exchange (ICE), and from the London Bullion Market Association (LBMA), which made the decision to appoint ICE to manage the pricing mechanism to replace the nearly century old Gold Fixing process which had come under considerable criticism as being too opaque and potentially subject to manipulation, was released Monday.  Among other things it noted that ICE Benchmark Administration (IBA), as the administrator for what will now be known as the LBMA Gold Price, will transition to a physically settled, electronic and tradeable auction, with the ability to participate in three currencies: USD, EUR and GBP. Within the process, aggregated gold bids and offers will be updated in real-time with the imbalance calculated and the price updated every 30 seconds. IBA will use ICE’s widely distributed front-end, WebICE, as the technology platform which will allow direct participants, as well as sponsored clients, to manage their orders in the auction in real time via their desktops……

To read the full article on Mineweb click on the link in the intro above or here

LBMA’s panel of experts’ views on gold, silver, platinum and palladium in 2015

Each year The London Bullion Market Association (LBMA) organises a competition whereby it invites a number of professional analysts, mostly from banks and other financial institutions, to predict precious metals prices for the year ahead.  This year it received entries from a record 35 such analysts and one would think the accumulated expertise, averaged out, might be a great indicator of what is to happen in the year ahead.  But, be warned,  on past performances this is sometimes far from  the case.  The individuals are also asked to give their reasons for their predictions and these make for some interesting reading.  The full resultant ‘survey is available for download directly from the LBMA by clicking on this link.

A slightly edited version of the executive summary for the competition entries and averages is set out below:

LBMAtab

Tabulation courtesy of the LBMA

This year’s LBMA forecast contributors are predicting that the gold price will remain broadly flat in 2015, but are more bullish (marginally) on the price prospects of the other precious metals forecasting increases of 2.1% (silver), 5.6% (platinum) and 5.3% (palladium) from that prevailing over the first two weeks of the year. Ross Norman of Sharps Pixley is the most bullish analyst with his forecast of $1,321 for the average gold price which gives him a great advantage should the gold price take off this year as anything above this level will gain him victory in the gold price competition and add to his impressive tally of past first places.  Adam Myers of Credit Agricole the most bearish with $950 and he again would benefit should the gold price take a really big dive this year and end amongst the debris promulgated by the out and out anti-gold brigade.

(For the record, here at LawrieOnGold we do believe that there are enough positive factors out there for gold that Ross Norman’s prediction could even be conservative and that Adam  Myers’ bleak forecast, which if it came about would probably drive 50% of the world’s gold mines into serious deficit and likely closure, is the most unlikely result for the year.  But we shall see.)

The analysts cite a number of factors which they see as likely to restrain gold prices in 2015, including the possible further strengthening in the US dollar, interest rate hikes by the Fed possibly commencing  in the second half of 2015, QE programmes in Europe (although some see this as gold positive) and a weak oil price reducing gold’s attraction as a hedge against inflation.  But the price could be supported by strong retail demand from China, India and elsewhere but only limited support is expected this year from the official sector suggesting a decline in Central Bank purchases.

Analysts are slightly more optimistic about the prospects of silver in 2015, forecasting a modest increase in price of 2.1% to $16.76/oz, with prices forecast to trade in an average range of $13.91 to $19.36. Ross Norman is again the most bullish ($18.56) with Robin Bahr of SocGen the most bearish ($13). Negative price factors again include expected strengthening of the dollar, disinflation as well as slow growth from China and the Eurozone thus affecting industrial demand for the metal. But some positive factors which could lend support to prices include expected additional global investment in solar power, continued support of silver ETFs and expectations that retail investors may take advantage of attractive prices.

Analysts are more bullish about the prospects of the platinum group metals in 2015 despite the current fall in the platinum price to below that of gold.  Platinum is expected to be the best performer with prices forecast to average $1,294 in 2015, 5.6% higher than its price in the first half of January although still 6.6% below its average price in 2014. Bart Melek of TD Securities offers the most bullish forecast of $1,434 and Glyn Stevens of International Commodities the most bearish at $1,098. Analysts cite positive influences on the price to include a supply deficit (despite expected improvement in South African production).  Rising costs might also push prices higher along with strong demand from China and industrial investors. On the negative side is the weak outlook for gold prices and macro-economic factors which are likely to act as a restraint on prices.

Palladium prices are forecast to average $838.40, up 5.3% from where it started the year and 4.4% above its average price in 2014. Rene Hochreiter of Sieberana Research is the most bullish with a forecast of $950 and again Glyn Stevens the most bearish with a forecast of $738. The palladium price is expected to benefit from a supply deficit as well as improving industrial demand and strong car sales in North America and China.

Overall all credit should be accorded to the analysts for setting precise forecasts out for all to see opening their judgements  up to negative comment should they end up being way out in their predictions. But then the kudos for being nearest to correct can bring some very positive accolades from their peers and followers.

To find out more about what the analysts predict will happen to prices for precious metals this year, and tables showing also their high and low price forecasts for the precious metals and what the factors are which are likely to affect their price, read their ‘expert’ views by clicking on the link noted at the start of the article and repeated here.

LBMA top gold forecaster: gold price to average $1321 in 2015, silver $18.56

The annual LBMA precious metals price competition’s top gold forecaster over the years, Sharps Pixley’s Ross Norman, is bucking the mainstream analyst consensus with a $1321 average gold price forecast for 2015.  Silver $18.56, Platinum $1268, Palladium $876.  Slightly modified version of article posted to Mineweb.com – the website for the best global mining and metals news and comment.

Lawrence Williams

In his submissions to this year’s LBMA precious metals forecasting competition, Ross Norman who heads up London bullion broker Sharps Pixley, and who has been probably the most successful forecaster in the LBMA panel in the past, says he is going out on a limb with his forecast for the gold price average this year at $1321. (It would certainly have been out on a limb last month although perhaps seems less so now given the gold price performance so far this year.) He is also looking for a gold price high of $1450 and a low of $1170 during the year. With most of the forecasting panel being bank and institutional analysts, whose forecasts tend to be much more conservative – some would say decidedly bearish – Norman must have a good chance of adding to his wins if gold’s advances continue.  The LBMA is expected to publish its full listing of its annual competition forecasts later this week, along with the analyst participants’ reasons for their predictions.

Norman has been the outright winner of price forecasting sections of the LBMA competition five times in the past  – usually by ‘going out on a limb’ which was a pretty good policy when the gold price was in its bull market phase  Norman has also had numerous Top 10 positions.  Perhaps he tends to favour the more bullish trends so will he be back on track again this year?  If the current momentum in the gold price gathers more strength still his forecasts could even prove conservative but it would perhaps be foolhardy to automatically assume that gold’s good start to the year will not beget a serious correction at some stage later on.

Norman’s stated reasons for his fairly positive predictions on gold this year are as follows: “If markets move on what you don’t know today, but will know tomorrow then it follows that many factors such as a US interest rate rises should already be factored into the current price… it also begs the question what the new drivers for 2015 will be. We see ongoing declines in economic growth prompting central banks to fight deflation by resorting to inflationary pressures in H2.  If our outlook for gold in dollar terms is bullish, in emerging currencies it may be even more so as investors seek to insure or hedge against currency debasement. As such, we foresee good demand for the physical.”

He sees gold already demonstrating that it has turned a corner and sees investor flows returning strongly but reckons there are unlikely to be runaway prices beyond the $1450 level without either significant new product innovations or without the sort of black swan events in the economy that few would wish for, although the potential for these looks ever greater following the SNB’s decision of last week to drop the Swiss Franc peg against the Euro.

He is also fairly bullish on silver, looking for an average price of $18.56 over the year, encompassing a high of $21.75.  In percentage terms these are big rises from the prices prevailing at the beginning of the year.  This is commensurate with the general pattern of silver moving up faster than gold on the upside – and he also reckons that investors will take comfort from silver ETF holdings which have remained firm (unlike gold ETFs) coupled with reported retail sales of the physical – coins and bars -which have also remained robust.

He seems to be a little more sanguine in his views on platinum.  Despite many analysts seeing platinum in serious supply deficit this year, he is looking for a yearly average price at $1268 – somewhat below that of his gold forecast suggesting that at some stage during the year the platinum price will fall back below that of gold as it has now already done on Friday after struggling to stay above the gold price level for most of last week.  He does foresee a high price during the year of $1480 – thus higher than that he sees for gold.

Finally there is palladium – the precious metal probably most supported by analysts in recent months due to what are seen as continuing strong fundamentals.  Norman is looking for an average price over the year here of $876 with a 2015 high reaching $975 as against the price at time of writing of $755.  Palladium was last year’s best performer in the precious metals sector and Ross suggests it may have trouble matching last year’s 10.9% increase, but even so he feels the junior precious metal as having another positive year based on continuing attractive supply/demand fundamentals despite the backdrop of a relatively weak global economy. He also points to an assessment suggesting an ongoing supply deficit in the order of 1.4 million ounces which will keep the metal well bid. Of the four metals, palladium remains once again his favourite, although, on his predictions perhaps gold and silver will do even better!