Banks and Dealers positioned for higher Gold price. GLD continues to add gold

Gold Today –New York closed at $1,234.70 on the 6th February after closing at $1,219.00 on the 5th February. London opened at $1,230.00 today.

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

         The $: € was stronger at $1.0666: €1 from $1.0750: €1 on yesterday.

         The Dollar index was stronger at 100.62 from 99.96 on yesterday. 

         The Yen was stronger at 112.19:$1 from yesterday’s 112.62 against the dollar. 

         The Yuan was weaker at 6.8790: $1, from 6.8625: $1, yesterday. 

         The Pound Sterling was weaker at $1.2363: £1 from yesterday’s $1.2457: £1.

 Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    2    07

     2017    2    06

      2017    2    03

SHAU

SHAU

SHAU

/

272.00

269.93

/

271.92

269.52

$ equivalent 1oz @  $1: 6.8790

      $1: 6.8625

$1: 6.8632

  /

$1,232.81

$1,223.30

/

$1,232.45

$1,221.44

Please note that the Shanghai Fixes are for 1 gm of gold. From the Middle Eat eastward metric measurements are used against 0.9999 quality gold. [Please note that the 0.5% difference in price can be accounted for by the higher quality of Shanghai’s gold on which their gold price is based over London’s ‘good delivery’ standard of 0.995.]

Shanghai was trading in gold at 274.3 Yuan during today’s session before London opened. This equates to $1,240.25. Shanghai now has momentum and was trading just 55 cents above New York’s close.

LBMA price setting:  The LBMA gold price was set today at $1,231.00 up from yesterday’s $1,221.85.  

The gold price in the euro was set higher at €1,152.89 after yesterday’s €1,137.45.

Ahead of the opening of New York the gold price was trading at $1,230.75 and in the euro at €1,152.77.  At the same time, the silver price was trading at $17.64. 

Silver Today –Silver closed at $17.73 at New York’s close Friday against $17.46 on the 3rd February. 

Price Drivers

What is now very clear is that if Marine le Pen and her party are elected, France will likely leave the E.U. Yesterday saw a plan to leave the E.U. produced by her party. It could involve a dual currency. Some have said that a dual currency never works. On the contrary dual currencies have pulled several nations out of a hole, including the U.K. in the early seventies. One currency for commercial transactions and another for capital. The ‘Dollar Premium’ used by the U.K. was structured not only to prevent capital leaving but gave incentives to capital coming in. It worked so well that after the crisis then, there was a return to a single currency and no capital exited thereafter that could not be managed. At Gold Forecaster we wrote at length that this was an option for Greece years ago. Properly handled such dual currencies are ideal in the case of a nation like France that faces the risk of a capital exit and the return of the French Franc. It must be accompanied by Capital/Exchange Controls at the same time during the period of transition.

In response to the promise of a return to the French Franc Mario Draghi had a sense of humour failure and stated that the euro was irreversible.  So the issue of sovereignty both in the E.U. and in the member states is on the table! Even Britain may lose a member nation, Scotland.

Such an introspective national posturing is very good for gold as it highlights the weaknesses inherent in national currencies, producing falling confidence in them. Hence the need for a non-national asset that is acceptable internationally, even between enemies and those uncreditworthy nations. Gold has always filled that role, lasting throughout history. National currencies have not.

But as we said yesterday, “The moment such talk hits the airwaves, the moment we hear that will mean a collapsing euro. We cannot buy that at all”. The strong members remaining will re-group behind the euro.

Gold ETFs – Yesterday we saw 4.418 tonnes of gold bought into the SPDR gold ETF (GLD) but no change was seen in the holdings of the Gold Trust (IAU).  Their respective holdings are now at 818.653 tonnes and 199.91 tonnes. 

Yesterday’s large purchase of gold into the SPDR gold ETF added to the ongoing steady buying pattern that began last week.

As we said yesterday, “The buying is persistent enough for the bullion banks to keep their books ‘long’ of gold. The potential for any shortage of open market stocks is great now, as the mood towards gold goes positive. So dealers and banks have re-positioned themselves for higher prices.”

Since January 4th 2016, 217.953 tonnes of gold has been added to the SPDR gold ETF and to the Gold Trust. 
 Julian D.W. Phillips:  GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance