Gold priced by the weak Yuan, silver retreats

Gold TodayGold closed in New York at $1,287.10 yesterday down from $1,290.00 on Friday. On Wednesday morning in Asia it pulled back to $1,281.00, as the Yuan weakened against a slightly stronger dollar, before the LBMA price setting in London.

LBMA price setting:  $1,280.30 down from Tuesday’s $1,296.50.

Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
2016  05  4

2016  04  3

SHAU

SHAU

267.79

269.80

268.02

269.06

Dollar equivalent @ $1: 6.5077

$1: 6.4804

$1,279.90

$1,294.94

$1,281.00

$1,291.39

The Shanghai Gold Fixings today showed only a small change in the Yuan gold price as one would have expected.

Why the fall in dollar terms? You will see the value of the Yuan against the U.S. dollar fell 0.25 of a Yuan.  This made all the difference, as it reflected a slightly strengthening dollar or a weakening Yuan, at a time when most other currencies continued strong, overall, against the dollar.

For those following the Technical picture, this is confusing because you are not following just the gold price any more, but the gold price in dollars. The Technical picture of gold in the Yuan is now very different. So is the Technical picture defining the dollar’s moves against gold or gold against the dollar? The same applies to all other currencies where the Technical picture is different.

Please note that China has been keeping the Yuan stable against the dollar recently, while it weakened against all currencies, but now it seems that China is not averse to weakening the Yuan against the dollar [and more against all other currencies]. As reflected in the gold price in the two currencies the gold price is now moving with the Yuan.

The dollar index is higher today, at 93.25 up from Tuesday’s 92.50. The dollar is stronger against the euro at $1.1475 from Tuesday’s $1.1552.

The gold price in the euro was set at €1,115.73 up from Tuesday’s €1,122.32.

Ahead of New York’s opening, the gold price was trading at $1,275.65 and in the euro at €1,111.68.  

Silver Today –The silver price closed in New York on Tuesday lower at $17.43 down 8 cents from Monday’s $17.51. Ahead of New York’s opening the silver price stood at $17.19.

Price Drivers

The influence of exchange rates is now clearly apparent. The gold price in the euro and the dollar has fallen but was relatively stable in the Yuan. This tells us the Yuan price of gold is dominant today. We need to see if this is so in the next days and weeks before we can be conclusive about this, but that is today’s picture.

We would have thought that yesterday’s 20 tonne purchase into GLD would have had a greater impact on the gold price in dollars, but exchange rates are the dominant factor in the gold price today.

Gold ETFs – Tuesday saw no purchases of gold into the SPDR gold ETF but saw a relatively large amount bought into the Gold Trust of 3.01 tonnes. This leaves their holdings at 824.943 and 191.31 tonnes in the SPDR & Gold Trust, respectively.  

While the Gold Trust purchase was a significant amount for the Gold Trust to see, it was not sufficient to overcome the influence of exchange rates, the Yuan dollar rate in particular.

Silver – The Silver price has retreated strongly , but may well rise much faster as soon as gold recovers and then we expect to see a ‘shunt’ effect on the silver price.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

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SGE benchmark takes gold price higher overnight

Article first published on news.sharpspixley.com 

There will be arguments as to which came first – the overnight rise in gold price on global after-hours markets, or the Shanghai Gold Exchange (SGE) pm fix – but the latest SGE figure of CNY 261.88 was at the higher end of trading being equivalent to around US$1,258 at the current CNY/USD exchange rate.  Whether the SGE gold fix is leading, or following, the general price trend is thus open to question.  But perhaps the principal driver of the overnight rise in the gold price will have been the fall in the US dollar, with the Japanese central bank keeping its monetary policy steady at its latest meeting.  The Japanese yen thus rose around 2% against the US dollar, which has a significant impact on the US Dollar Index, which fell around two-thirds of a percent.

Needless to say, though, the move above the $1,250 level, which had been strongly resisted on the U.S. and London spot markets yesterday, was breached in the overnight trade.  The CNY price differential between the am and pm ‘fixes’ in Shanghai was around 0.7%.  The big question is can gold retain these kinds of levels, or even mover higher?  (At the time of writing the spot price is sitting at a little over the $1,257 level).  Or will it be brought down again by the big players on the futures markets who could have a lot to lose should the gold price surge higher in having to unwind some big short positions?

Today’s trading will be interesting.  The statement out of the FOMC yesterday was pretty non-committal with the latest deliberations suggesting no further interest rate imposition until later in the year – perhaps even not until Q3 or Q4 – although this was hardly unexpected.  Followers of Fedspeak noted that the latest statement made no mention of the possible adverse effects of a US$ rate rise on the global economy, and particularly on emerging markets, which could have an adverse impact on the US economy.  But as usual the Fed was marginally positive on U.S. economic growth, although its forecasting record on this has not been particularly impressive in the past.

Overall it looks as though the very low interest rate scenario will continue, at least for the remainder of the year, which in effect keeps them in negative territory in real terms.  Coupled with negative and zero interest rates throughout much of the rest of the world, all this remains positive for gold in the short to medium term, and probably into 2017 at least.  To counter this GFMS reports gold demand fell to its lowest level for 7 years in Q1, primarily due to weak Asian demand.  Indian demand fell ahead of anticipated positive changes in the tax position on gold in the budget – which did not materialise, and subsequently led to a jewellers’ strike which will also have depressed Q2 demand.  Chinese demand was also down – some of which will have been due to the timing of the Chinese New Year.  Chinese demand has been reported as picking up of late.  However GFMS sees gold falling back to below $1,200 in the short to medium term, but remain above cyclical lows.  So far the gold price has not been co-operative!