My initial July gold and silver articles on Sharps Pixley websites

The gold price started July positively, silver rather less so and my initial takes on this, as published on the http://www.sharpspixley.com Metals Daily website are linked below.  Note the dates of the articles.  Gold and silver may have performed a little differently (positively in gold’s case) since the articles were written. Click on the titles to read in full:

Gold catches another wave ahead of U.S. holiday

04 Jul 2019 – The gold price moved sharply upwards over $1.400 on Tuesday and remains above that level for the Independence Day holiday. Will prices move on further once th holiday is over next week? Silver, though, remains muted

Silver should be good to go

03 Jul 2019 – Silver has been the weak link in the precious metals chain, but is should start to play catch-up alongside a booming gold price’

 Gold: What a difference a month makes

01 Jul 2019 – June saw the gold price increase by around $100, and more at one time, before falling $30-40 back after various accords at the G20 meeting. What will happen now?

 

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Will Gold and Silver Pull Back or March Ahead?

By Stefan Gleason*

Either way, long-term gold bulls shouldn’t sweat this particular technical level. Major bull markets need to pull back and reconsolidate periodically.

Whether that starts happening this week, or later on at higher price levels, a downturn of some magnitude is inevitable.

One indicator that may be pointing toward a pullback sooner rather than later is the negative divergence in gold mining stocks which are often leading indicators for the yellow metal.

Gold Price Chart

Despite gold spot prices rallying along with the broader U.S. equity market last week, the HUI Gold BUGS (Basket of Unhedged Gold Stocks) Index fell by 3.8%. That suggests that some big institutional speculators are turning bearish on gold near term.

If you’re looking to accumulate bullion, a pullback should be welcomed as an opportunity to get in at lower levels. Long-term bulls will not want to see anything as severe as the drawdown that occurred in the second half of 2016, however. They will be looking for any coming correction to bottom out above the $1,125/oz low hit in December.

Higher highs and higher lows characterize a major bull market. The December 2016 low was a higher low than the one from 2015. A higher high will occur when gold prices can move above $1,375. At that point, the public might start taking notice of precious metals markets – which so far this year have been overshadowed by the series of record highs in the U.S. stock market.

President Donald Trump has taken credit for the rally in stocks. His vows to cut taxes and regulations have, no doubt, driven buying by investors.

Over the weekend, Trump sent out this tweet: “Great optimism for future of U.S. business, AND JOBS, with the DOW having an 11th straight record close. Big tax & regulation cuts coming!”

Great optimism for future of U.S. business, AND JOBS, with the DOW having an 11th straight record close. Big tax & regulation cuts coming!

Trump also wants a weaker dollar to help boost U.S. manufacturing. That could put him in conflict with the Janet Yellen Fed if it moves to raise interest rates.

Trump will have the opportunity to appoint multiple new members to the Federal Reserve Board. It’s one of the reasons why top financial and geopolitical analyst Jim Rickards is so bullish on gold.

“If Trump follows through on the logic of the cheaper dollar, he’s going to appoint doves to the Board. The market’s going to get the signal immediately and the price of gold is going to soar,” Rickards said in a recent Money Metals podcast interview. “We’ve got some very short run headwinds, maybe between now and April, but for certainly the second half, even the last three quarters of the year, I’m extremely bullish on gold.”

There will be some bumps along the way. But those who hang on tight for the ride in gold and silver markets stand to be rewarded.

Will Shanghai pull gold price through $1,200?

Gold Today –New York closed at $1,187.20 on the 10th January after closing at $1,182.50 on the 9th January. London opened again at $1,190.40 today.

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

         The $: € was stronger at $1.0554: €1 from $1.0611: €1 yesterday.

         The Dollar index was stronger at 102.09 from 101.66 yesterday. 

         The Yen was weaker at 116.05: $1 from yesterday’s 115.40 against the dollar. 

         The Yuan was stronger at 6.9225: $1, from 6.9244: $1, yesterday. 

         The Pound Sterling was slightly stronger at $1.2156: £1 from yesterday’s $1.2150: £1.

 Yuan Gold Fix

Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    1    11

     2016    1    10

      2016  12    9

SHAU

SHAU

SHAU

/

267.22

265.27

/

268.41

265.71

$ equivalent 1oz @  $1: 6.9225

      $1: 6.9244

$1: 6.9329

  /

$1,200.65

$1,191.56

/

$1,205.99

$1,193.53

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.]

 If Shanghai is leading the way for the gold price, we would expect London and New York to rise too. Consequently, the gold price needs to move to $1,200 for it to be in line with Shanghai now.

Shanghai on Tuesday was $13 higher than the close of New York. This morning London opened only $10.59 lower than yesterday’s Shanghai closing. And this strength in gold is happening while the dollar is rising and the Yuan slipping slightly.

Meanwhile the People’s Bank of China has reported a fall in its gold reserves of in December by 20.98 tonnes. Is this a change in direction of the PBoC? We don’t accept that for a second.  The Chinese authorities are rarely clear on such subjects and often don’t give a full picture of their situation, as it is not in their interests to do so. So this figure could be some sort of window dressing for our benefit. We know they use two agencies to hold gold on their behalf until it suits them to take the gold into reserves. They could easily have handed it back to the non-reporting one on a temporary basis. What we do know is that it is illegal to export gold from China. We also know that the SGE itself can hold gold and does not disclose it.

LBMA price setting:  The LBMA gold price setting was at $1,187.55 this morning against yesterday’s $1,183.20. 

The gold price in the euro was set higher at €1,128.31 after Friday’s €1,117.60 as the dollar strengthened.

Ahead of the opening of New York the gold price was trading at $1,188.15 and in the euro at €1,131.46.  At the same time, the silver price was trading at $16.77. 

Silver Today –Silver closed at $16.79 at New York’s close yesterday from $16.57 on the 9th January. 

Price Drivers

We decided to look at the gold market through the eyes of a non-professional at the gold market. It quickly became clear just how easy it was to be informed in a way that distorted the true picture and confuse investors.

For instance, when you hear that gold rose x% in sterling or y% in the dollar, that ignores the fact that the gold market is a global market where prices reflect the global market demand and supply eventually.

We would prefer to see, “the dollar fell against gold, or sterling fell against gold”, a reflection of currency performance, not gold’s performance.

As you have read in these reports the gold price is rising in all currencies at the moment, with both London and New York trying to catch up to Shanghai prices. New York and London have not moved up because of what Prime Minister May said, but that gold prices in sterling rose because of the pound’s fall.

No event in the U.S. has caused gold to move up this week. It has moved up because of global demand and supply factors. In China demand for gold is robust. In the U.S. there was a very big sale [nearly 9 tonnes] of gold in one day earlier this week, so if the gold price was driven by U.S. factors alone, the gold price would have fallen. It didn’t, it rose!

After all gold is a currency, it is both an asset and cash, globally.  

Relevant factors to the global gold price must not be local factors, unless they globally affect the gold price. Most that are attributed to moving the gold price just aren’t.

That’s why understanding just where gold’s pricing power lies is so important.

That’s why understanding currencies is so critical to understanding the gold price.

Gold ETFs – Yesterday, in New York, there were no sales from the SPDR gold ETF or any from the Gold Trust, leaving their respective holdings at 804.996 tonnes and 198.30 tonnes. 

As we said in an earlier report, “Substantial sales of gold on a daily basis are needed for New York to control the gold price”.

Julian D.W. Phillips 

 GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

Battle reigns in the physical gold markets

Gold TodayNew York closed yesterday at $1,328.90 Friday.  London opened at $1,327.00.

    • The $: € was slightly stronger at $1.1219 down from $1.1271 Friday.
    • The Dollar index was weaker at 94.40 from 94.94 Friday.
    • The Yen was stronger at 102.08 up from 102.12 Friday against the dollar.
    • The Yuan was weaker at 6.6808 from 6.6798 Friday.

 

  • The Pound Sterling was weaker at $1.3297 from Friday’s $1.3297.

 

Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
     2016  09  12

     2016  09  9

SHAU

SHAU

285.53

287.79

286.04

287.75

Dollar equivalent @ $1: 6.6808

$1: 6.6798

$1,329.33

$1,340.05

$1,331.70

$1,339.86

Shanghai has always been keen to go higher than London and New York. This is not because there is a shortage of gold, waiting for imports using premiums to attract it to the country. China’s supply from outside describes its huge appetite, which is continuing. Shanghai continues to try to keep its prices in line with other global gold markets.

Physical supplies will continue to flow into the country while New York prices are being held back.

The difference on Friday was that just under 12 tonnes of gold was sold from the SPDR gold ETF which caused the fall in the gold price.  Physical sales of gold such as these do drive the gold price down, just as earlier, 14 tonne purchases drove it up to $1,350. The battle in the physical markets is on!

LBMA price setting:  The LBMA gold price setting on Monday was at $1,327.50. Friday it was at set at $1,335.65.

The gold price in the euro was set on Monday at €1,183.05 against Friday’s 1,185.61.

Ahead of the opening of New York the gold price was trading at $1,327.10 and in the euro at €1,182.38.  At the same time, the silver price was trading at $18.85.

 

Silver Today –The silver price was pulled back to $19.07 at New York’s close on Friday down from $19.62, Thursday.  

Price Drivers

Today, we have a very important question on the shape of the global economy and in particular the U.S. economy. After so much stimuli globally, inflation should have taken off by now. It hasn’t. All it has managed to do is to counter deflation leaving both interests and inflation at extremely low levels.

But something else is happening: Liquidity levels are dropping, as is the velocity of money.

Central bank efforts, via stimuli, appear to be starting to lose the battle against deflation. In the past, when this has happened, the pressure to add more stimuli to the economy to continue to counter deflation grows. But larger and larger amounts also fail and even more stimulus is needed to counter rising deflation. More is added, then more needed and so on. At some point inflation takes off like a rocket but also fails to counter deflation, which also takes off, with an economy now starting to shrink. This is a fact of history and one very much in danger of being repeated!

Are we on the brink of that?

This time round governments will be unable to act strongly, as in many developed countries, they appear to be emasculated having not acted decisively since the ‘credit crunch’. And central banks, which should have been backed by government actions, were left holding the baby, without the full array of tools to even approach the problem. They are looking increasingly exhausted and unable to anything different, only more of the same.

The prime loser will be the value of currencies as they fall in value against gold [and silver].

Gold ETFs – There was a massive sale of 11.871 tonnes from the SPDR gold ETF but no change in the holdings of the Gold Trust, leaving their respective holdings at 939.940 tonnes and 225.39 tonnes. This sale did not cause the gold price to breakdown convincingly. We expect the next moves by large SPDR gold investors may give the gold price the direction it is looking for.

Silver – The silver price tumbled lower to just above $19.00 showing the typical exaggeration of the moves in the gold price. Silver price volatility will continue.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

Gold only sensitive to exchange rates and ETF movements for now

Gold TodayGold closed in New York at $1,343.40 on Monday after Friday’s close at $1,341.00.  London opened at $1,341 again.

    • The $: € was at $1.1335 with a wide spread, from $1.1305.
    • The dollar index was at 94.39 from 94.64 Monday.
    • The Yen was at 100.15 from Monday’s 100.48 against the dollar.
    • The Yuan was weaker at 6.6447 from 6.6540 Monday.

 

  • The Pound Sterling was at $1.3184 from Monday’s $1.3144.

 

Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
2016  08  23

2016  08  22

SHAU

SHAU

286.47

286.54

286.56

/

Dollar equivalent @ $1: 6.6447

$1: 6.6540

$1,340.96

$1,339.40

$1,341.37

$1,354.55

All global gold markets, together with global currencies seem to be moving sideways today.

The Yuan is trying to hold onto the 6.65 area, we presume because we are about to enter the month in which if finally becomes one of the currencies making up the S.D.R.  Thereafter we expect any restraint on the Yuan going weaker [gently] will be lifted.

The dollar, at the same time, continues to show a slightly weakening trend holding at lower levels.

LBMA price setting:  $1,338.50 after Monday 22nd August’s $1,334.30.

The gold price in the euro was set at €1,181.69 down €7.51 from Friday’s €1,189.80.

Ahead of the opening in New York the gold price stood at $1,341.65 and in the euro at €1,183.17.  

Silver Today –The silver price closed in New York at $18.99 on Monday down from $19.75 on Friday.  Ahead of New York’s opening the price was trading at $19.03.

Price Drivers

The market in gold remains sensitive to exchange rate moves and to purchases and sales in the gold ETFs There is little else of substance to move these prices currently.

Janet Yellen is due to speak today, but is expected to remain dovish on rate hikes. Hence the better tone in the gold market.

China has been given the OK to issue an S.D.R. bond, purchasable in Renminbi only, by the World Bank. This new bond issuance is 2 billion SDRs which is equivalent to $2.8 billion.

The precise timing of issue and individual bond terms will be based on favorable market conditions, at the time of issuance.

This is a bold move and one aimed at further internationalization of the Yuan.  It will also make the IMF very happy as the S.D.R. has not been credible money in use widely, itself. By issuing only in the Renminbi any international investor must purchase the Yuan. And this is China’s aim, to widen the use of the Chinese currency as far as possible.

Gold ETFs – In New York on Monday there were purchases of 2.375 tonnes into the SPDR gold ETF (GLD) but no change in the holdings of the iShares Gold Trust (IAU). This left their respective holdings at 958.369 tonnes and 223.85 tonnes.

Silver –Silver prices now holding around $19.00 and will remain sensitive to even small moves in the gold price.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

Fundamental change in gold price structure under way

Gold TodayGold closed in New York at $1,352.70 on Thursday after Wednesday’s close at $1,346.50.  London opened at $1,341 but immediately recovered to $1,346 before rising further.

    • The $: € was correcting at $1.1307 from $1.1329.
    • The dollar index was correcting at 94.52 from 94.35 Thursday.
    • The Yen was correcting slightly at 100.20 from Thursday’s 100.08 against the dollar.
    • The Yuan was weaker at 6.6517 from 6.6324 Thursday.

 

  • The Pound Sterling was slightly weaker at $1.3122 down from Thursday’s $1.3144.

 

Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
2016  08  19

2016  08  18

SHAU

SHAU

288.02

288.80

288.68

288.84

Dollar equivalent @ $1: 6.6517

$1: 6.6324

$1,346.79

$1,354.36

$1,349.87

$1,354.55

New York closed higher than Shanghai’s whole day as Shanghai gold prices remain steady in Yuan!

It was a rapidly weakening Yuan exchange rate against the dollar that was responsible for dollar gold prices to fall. The combination of the Yuan price of gold and the move in the Yuan exchange rate affecting dollar gold prices this way, is just what the Shanghai Gold Exchange wanted. When they established the Fix an accompanying statement made it clear that it was not just to give SGE gold prices but to promote the use of the Yuan in such dealings. Here it is!

The Yuan throughout the week has being doing just that as it gyrated up and down.  The dollar, at the same time, while showing a weakening trend, has been comparatively steady.

We will watch this feature going forward as it indicates where pricing power lies.

LBMA price setting:  $1,346.85 after Thursday 18th August’s $1,347.10.

The gold price in the euro was set at €1,189.80 up €1.20 from Thursday’s €1,188.60.

Ahead of the opening in New York the gold price stood at $1,345.20 and in the euro at €1,187.55.  

Silver Today –The silver price closed in New York at $19.75 on Thursday down from $19.66 on Wednesday.  Ahead of New York’s opening the price was trading at $19.45.

Price Drivers

Long time readers of this daily report will know that we believe a fundamental change in the structure of the gold price is underway with pricing power slowly but surely headed eastwards to Shanghai.

With COMEX, a ‘paper gold’ market with the exception of between 1 & 5% physical dealings, yet controlling the dollar gold price and London, a secondary influence, despite it having a considerably larger measure of physical dealing in its midst, the fundamentals of gold demand and supply have become secondary to the influences of economic events on the gold price.

With China the largest physical gold market in the world and dealings based on physical content it overshadows the rest of the world’s gold markets already and yet this is not apparent. We know it will happen, so we follow the Shanghai Gold Fixings carefully to see the change in influence over the gold price come through and show itself in the price. What we have seen this week, in Shanghai and the Yuan gold price, is a shift away from the dollar in establishing the gold price. If the Chinese get what they want the main gold price will be a Yuan price and not a dollar price!

Gold ETFs – In New York on Tuesday there were sales of 1.781 tonnes from the SPDR gold ETF but no change in the holdings of the Gold Trust. This left their respective holdings at 955.994 tonnes and 223.85 tonnes.

Silver –Silver prices are dropping as they exaggerate gold’s small slippage, but, as always, will turn if gold breaks through resistance. If gold does not, we expect to see silver hold around these levels as they have already discounted a fall in the gold price.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

Gold and silver prices steady in the euro weak in the dollar  

Gold TodayGold closed in New York at $1,346.10 on Tuesday after Monday’s close at $1,339.40.  London opened at $1,341.

    • The $: € was almost unchanged at $1.1262 from $1.1268.
    • The dollar index was almost unchanged at 94.96 from 94.94 Tuesday.
    • The Yen was slightly weaker at 100.76 from Tuesday’s 100.25 against the dollar.
    • The Yuan was weaker at 6.6330 from 6.6270 Tuesday.
  • The Pound Sterling was slightly stronger at $1.3014 up from Tuesday’s $1.2934.

Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
2016  08  17

2016  08  16

SHAU

SHAU

287.60

287.48

287.39

288.47

Dollar equivalent @ $1: 6.6330

$1: 6.6270

$1,348.61

$1,349.27

$1,347.63

$1,353.92

Again Shanghai was higher than New York’s closing but London decided to walk its own road at the opening, opening lower at $1,341. The reason London pulled gold prices down before the opening in London was the continuing ‘strength of the euro/weakness of the dollar, as you can see in the euro gold prices below.

LBMA price setting:  $1,342.75 after Tuesday 16th August’s $1,349.10.

The gold price in the euro was set at €1,191.65 down €5.32 from Tuesday’s €1,196.97.

Ahead of the opening in New York the gold price stood at $1,343.75 and in the euro at €1,197.42.  

Silver Today –The silver price closed in New York at $19.80 on Tuesday down from $19.81 on Monday.  Ahead of New York’s opening the price was trading at $19.68.

Price Drivers

Yesterday saw more tonnage bought into the U.S. gold ETFs, but this had no effect on gold prices.  Gold had hit $1,354 during the day in both London and New York, but pulled back on little to no selling volume thereafter. It is reported that Stanley Drukenmiller has sold his holdings of SPDR gold ETF Call Options and this after his condemnation of the actions of central banks, justifying holding gold in May, not so long ago. We doubt he would have exited gold after that position statement.  More likely he would have found another way to hold gold. We would have expected him to change to allocated gold in physical form, if he was a serious long-term holder.

After all the SPDR gold ETF shareholders [which is what you buy when you buy into the ETFs] don’t own gold, the company owning SPDR does. And that rather defeats the purpose of owning such holdings. After all if central banks get into trouble one of the most likely sources of gold for them lies in SPDR gold holdings. So, it makes far more sense to own the gold directly out of reach of central banks in an allocated form [just holding it outside the country is insufficient to protect from confiscation] as no doubt Mr. Drukenmiller knows.

The market appears to be holding back ahead of the publication of the Minutes from the last Fed meeting for signs that a rate hike is in prospect. The markets have indicated that there is a 50% chance of a rate hike in December, not September, this year. But productivity in the U.S., a major factor in the decision remains at low levels and current data has been weak. As we said last yesterday, “On several fronts, developed world and emerging world bonds, equity markets and on the currency front, any lifting of U.S. interest rates would catapult these markets down, while the dollar would be catapulted higher. So the weight of responsibility on the U.S. Fed grows by the day. We at Gold Forecaster do not expect such a rise in rates for a long, long time because of this risk.”

Gold ETFs – In New York on Tuesday there were purchases of 1.781 tonnes into the SPDR gold ETF (GLD) and 0.96 of a tonne into the Gold Trust (IAU). This left their respective holdings at 962.228 tonnes and 223.85 tonnes.

Silver –Silver prices stumbled heavily pulling back from $20 to the mid-$19. Should gold rise through $1,360 you will see silver run ahead well over $20.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

Weaker dollar boosts gold and silver prices

 Gold TodayGold closed in New York at $1,339.40 on Monday after Friday’s close at $1,334.60.  London opened at $1,350.75.

    • The $: € was heavily weaker at $1.1268 from $1.1168.
    • The dollar index fell to 94.94 from 95.65 Monday.
    • The Yen was stronger at 100.25 from Monday’s 101.07 against the dollar.
    • The Yuan was stronger at 6.6270 from 6.6459 Monday.

 

  • The Pound Sterling was slightly stronger at $1.2934 up from Monday’s $1.2924.

 

Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
2016  08  16

2016  08  15

SHAU

SHAU

287.48

286.66

288.47

286.97

Dollar equivalent @ $1: 6.6270

$1: 6.6459

$1,349.27

$1,341.60

$1,353.92

$1,343.05

Shanghai was higher than London’s opening and much higher than New York’s close. London opened at $1,350 whereas as you can see, the p.m. Fix in Shanghai was at nearly $1,354. Shanghai’s physical demand is greater than New York’s paper demand today. U.S. physical demand via the gold ETFs was absent yesterday.

The rise in Yuan prices was against a backdrop of a stronger Yuan, which was in the face of a weak dollar. The Yuan has shown strength in the last few days despite good reasons to weaken against the dollar. We expect that this is because of the impending ‘Go!” signal for the Yuan to be ‘officially’ designated one of the world’s hard currencies. Once that IMF confirmation is published, we expect to see the Yuan decline steadily.

LBMA price setting:  $1,349.10 after Monday 15th August’s $1,339.20.

The gold price in the euro was set at €1,196.97 down €1.93 from Monday’s €1,198.90 due to the weaker dollar.

Ahead of the opening in New York the gold price stood at $1,353.70 and in the euro at €1,198.76.  

Silver Today –The silver price closed in New York at $19.81 on Monday down from $19.69 on Friday.  Ahead of New York’s opening the price was trading at $20.08.

Price Drivers

After many institutions forecast a stronger dollar it continues to weaken against reason, or so it seems. Emerging market currencies and bonds are doing well as they offer much higher yields. Once the Fed, eventually, does lift interest rates, we expect a huge unwinding of these positions.

On several fronts, developed world and emerging world bonds, equity markets and on the currency front, any lifting of U.S. interest rates would catapult these markets down, while the dollar would be catapulted higher. So the weight of responsibility on the U.S. Fed grows by the day. We at Gold Forecaster do not expect such a rise in rates for a long, long time because of this risk.

This is very positive for gold and silver, because such dramatically heightened risks for world markets makes gold and silver a haven set apart from these markets and a port in the coming storms.

Gold ETFs – In New York on Monday there were no sales or purchases from or into the SPDR gold ETF (GLD) or the Gold Trust (IAU). This left their respective holdings at 960.447 tonnes and 222.89 tonnes.

 

Silver –Silver prices are above $20 at the moment as gold rises to the midpoint in its trading range again. Should gold rise further even to $1,360 you will see silver run ahead.

 

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

Big sale out of GLD on Friday dented gold price – but not for long.

Gold TodayGold closed in New York at $1,334.60 on Friday after Thursday’s close at $1,337.90.  London opened at $1,341.80.

    • The $: € was slightly weaker at $1.1168 from $1.1156.
    • The dollar index fell slightly to 95.65 from 95.83 Friday.
    • The Yen was slightly weaker at 101.07 from Friday’s 101.04 against the dollar.
    • The Yuan was weaker at 6.6459 from 6.6440 Friday.

 

  • The Pound Sterling was weaker at $1.2924 down from Friday’s $1.2956.

 

Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
2016  08  15

2016  08  12

SHAU

SHAU

286.66

286.86

286.97

286.95

Dollar equivalent @ $1: 6.6459

$1: 6.6440

$1,341.60

$1,342.92

$1,343.05

$1,343.34

Shanghai again turned out to be higher than New York’s close but this time without any exchange rate influence as the Yuan was relatively steady. London followed Shanghai this time too, opening just slightly lower than Shanghai’s close.

As the time approaches when the Yuan becomes one of the world’s ‘hard’ currencies it is meeting the definition of being widely traded in the global monetary system. Just to what extent remains to be publicized. Certain Capital Controls still persist but the silence on this ahead of the incorporation of the Yuan in the IMF’ Special Drawing Rights is deafening.

At the same time the discussions over the type of gold trading London will see in the future has, on one side, Goldman Sachs and the Chinese ICBC who are pressing for a more transparent system. No doubt if precise numbers were published on London’s gold trade, they would influence just where gold’s pricing power resides.

LBMA price setting:  $1,339.20 after Friday 12th August’s $1,336.70.

The gold price in the euro was set at €1,198.90 up €0.50 from Friday’s €1,198.40.

Ahead of the opening in New York the gold price stood at $1,337.25 and in the euro at €1,196.32.  

Silver Today –The silver price closed in New York at $19.69 on Friday down from $19.95 on Thursday.  Ahead of today’s New York’s opening the price was trading at $19.77.

Price Drivers

On Friday in New York there was a very big sale of gold from the SPDR gold ETF of over 12 tonnes. This prompts the question, “Has U.S. demand for the shares of the gold ETFs fallen away?’  The data out of the U.S. on the economy is weak telling us that while the economy is OK, it is not as strong as it needs be to invigorate growth. The rest of the world [with the exception of China] is also giving a poor showing. Against the backdrop of globally burgeoning debt, the conditions where even the U.S. investor discards his gold do not exist at present. Add to that the approaching ‘gold season’ and we do not expect to see the thundering herd leave its gold positions. Indeed demand from gold from the U.S. has not reached the point where it is a ‘thundering herd’. It has a long way to go before U.S. investors are well stocked with gold in their portfolios.

We have a couple or more weeks before the ‘gold season’ comes into play so the gold price will continue to consolidate.

Gold ETFs – In New York on Friday there were very large sales of 12.171 tonnes from the SPDR gold ETF (GLD) but purchases of 1.65 tonnes into the Gold Trust (IAU). This left their respective holdings at 960.447 tonnes and 222.89 tonnes.  Undoubtedly the big GLD sale coincided with the sharp mid-session drop in the gold price on Friday, from which its appears to have been recovering gradually today.

Since January 4th this year, the holdings of these two gold ETFs have risen by 385.722 tonnes.

Silver –Silver prices were pulled back below $20 in line with the fall in gold prices after the heavy sale from the SPDR gold ETF.  We wait to see whether New York will counter this as bargain hunters move in.

Julian D.W. Phillips

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

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]

Could we see strong gold demand continue in H2?

Gold TodayGold closed in New York at $1,346.70 on Wednesday after Tuesday’s close at $1,340.60.  London opened at $1,346.

    • The $: € was barely changed at $1.1144 from $1.1146.
    • The dollar index fell to 95.82 from 95.82 Wednesday.
    • The Yen was stronger at 101.28 from Wednesday’s 101.84 against the dollar.
    • The Yuan was stronger at 6.6406 from 6.64 Wednesday.

 

  • The Pound Sterling was weaker at $1.2958 up from Wednesday’s $1.3050.

 

Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
2016  08  11

2016  08  10

SHAU

SHAU

287.34

288.63

287.36

289.47

Dollar equivalent @ $1: 6.6406

$1: 6.6400

$1,345.85

$1,352.02

$1,345.95

$1,355.95

All three chief global gold markets were in line in the last day. Looking at the Technical picture, we see that the gold price is showing a ‘quiet before the storm’.

The gold and silver markets are no place for the cautious now. Even a small bit of gold related news will trigger a strong move. Question is, “Which Way will it go”.

LBMA price setting:  $1,344.55 after Wednesday 10th August’s $1,351.85.

The gold price in the euro was set at €1,206.20 down €3.79 from Wednesday’s €1,209.98.

Ahead of the opening in New York the gold price stood at $1,345.45 and in the euro at €1,206.47.  

Silver Today –The silver price closed in New York at $20.17 on Wednesday up from $19.85 on Tuesday.  Ahead of New York’s opening the price was trading at $20.16.

Price Drivers

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.

Since January 4th this year, the holdings of these two gold ETFs have risen by 396.243 tonnes.

Silver –Silver prices jumped back to over $20 in the last day 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]

Gold firms after fall to support again

Gold TodayGold closed in New York at $1,335.30 on Monday after Friday’s close at $1,336.40.  London opened at $1,333.

    • The $: € was up at $1.1092 from $1.1096.
    • The dollar index rose to 96.35 from 95.30 Monday.
    • The Yen was slightly stronger at 102.32 from Monday’s 102.41 against the dollar.
    • The Yuan was weaker at 6.6614 from 6.6616 Monday.

 

  • The Pound Sterling was weaker at $1.2990 down from Monday’s $1.3042.

 

Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
2016  08  9

2016  08  8

SHAU

SHAU

286.29

286.78

285.87

286.54

Dollar equivalent @ $1: 6.6615

$1: 6.6614

$1,336.73

$1,339.00

$1,334.77

$1,337.88

With the exception of the pound sterling, which continues to weaken substantially, all other currencies were stable in the day.

We note that the thinking in the Chinese media is that the Yuan will continue to drop. Official policy likes to be broadcast in the media, so we expect the falls to continue towards 7.00 to the U.S. dollar.

It is important to note that Chinese demand for gold is down when one looks at the withdrawals from the Shanghai Gold Exchange.

But we note two factors; first this is not due to a fall-off in the growth of the Chinese middle classes, which continue to burgeon, as is evidenced by auto demand in the country and secondly that Shanghai gold prices are not driving global gold prices at the moment.  Likewise Indian demand!

We cannot see this happening until gold availability in London falls to the point that liquidity drops to almost critical levels. Certainly London’s liquidity levels have reduced substantially over the last two years. If U.S. demand combines with Asian demand we will see a change in pricing power.

LBMA price setting:  $1,332.90 after Monday 9th August’s $1,330.00.

The gold price in the euro was set at €1,202.11 up €2.07 from Monday’s €1,200.04.

Ahead of the opening in New York the gold price stood at $1,333.55 and in the euro at €1,203.08.   Post opening gold and silver both gained in strength with gold moving above $1,340.

Silver Today –The silver price closed in New York at $19.73 on Monday up from $19.70 on Friday.  Ahead of New York’s opening the price was trading at $19.63.

Price Drivers

Gold and silver held remarkably steady yesterday in the face of a large sale of gold from the SPDR gold ETF. The gold price continues to rest on support and with the gold season nearly on us the physical market, at least will see demand grow significantly. In the U.S. fears of a global slowdown [and low productivity] affecting the U.S. economy and the large number of potential banking and debt crises that are more than likely, the atmosphere for gold continues to be positive.

A President Trump has announced he will institute a cutback in Corporate Tax to 15% that should be sufficient to encourage many non-manufacturing companies to return to the U.S. Why not manufacturing? Because the wage differentials between U.S. wages and developing countries wages, remains substantial!  But Trump certainly knows how to press the buttons of the electorate. We can only reflect that the ridicule heaped on him as a Republican Presidential Candidate did not stop him, so the ridicule we now see for him may follow the same road.

Gold ETFs – In New York on Monday there were sales of 6.531 tonnes sold from the SPDR gold ETF but nothing from or to the Gold Trust. This left their respective holdings at 973.805 tonnes and 220.40 tonnes.

Since January 4th this year, the holdings of these two gold ETFs have risen by 396.59 tonnes.

Silver –Silver prices have been more stable than gold in the last day, but this is simply marking time before gold moves again.

Julian D.W. Phillips

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

 

Top Silver Mining CEO Makes a Remarkable Price Forecast

Transcript of a podcast interview by Moneymetals.com’s Mike Gleason with silver miner First Majestic’s CEO, Keith Neumeyer

Welcome to this week’s Market Wrap Podcast, I’m Mike Gleason.

Coming up we’ll hear a fantastic interview with Keith Neumeyer, CEO of First Majestic Silver Corp. Keith gives an insider’s take on the tremendous and unsustainable imbalance that exists between the available mine supply of silver compared to gold and what it likely means for the silver to gold ratio. And you’ll definitely want to hear Keith’s long term price target for the white metal, which may surprise you.

Keith Neumeyer

Mike Gleason: It is my privilege now to bring in Keith Neumeyer, Founder and CEO of First Majestic Silver Corp (NYSE:AG), one of the top silver mining companies in the world. Keith has an extensive background on the resource and finance sectors and has also been an outspoken voice about concerns of distortions in the futures markets pricing for silver. It’s a real privilege to have him back on with us again.

Keith, thanks so much for joining us and welcome back.

Keith Neumeyer: Thanks very much. It’s exciting times, obviously, for everyone.

Mike Gleason: Yeah, it certainly is. To start off here, Keith, things are significantly different today here in August compared to where they were back in early February when we talked to you last. Both gold and silver have had fantastic starts to the year. One of the things I asked you when we had you on earlier in the year was whether or not you believed we would finally get some follow through after a good first month of 2016 because that is something we did not get after good starts to the metals in 2014 and 2015. You said it felt like it was different this time around and you were fairly confident and you were dead-on correct. So what’s your take on the first 7 months of the year here… what have been some of the key drivers for the advance in your view… and then how different is the environment today for someone in your position versus say 6 or 8 months ago?

Keith Neumeyer: Well, you know, Mike, it’s pretty interesting. This is a lot different than … I was somewhat of that view earlier in the year when the market did what it did. The fact that we didn’t have the normal correction mid-year, because, as you probably know, and it’s well known in the sector, I think, that generally speaking, April, May, June are relatively soft periods for the mining stocks. And quite often gold and silver do correct into those months and then in the summer they often just bottom out and then they start to progress higher as the year progresses into November, December, and then into January and February. You could look at charts that go back 30 years and see that pattern. It’s this repeated pattern that a lot of people actually trade against and have made money doing it. I’ve actually personally done it myself with a lot of success.

This year, we saw a couple of day correction. I remember in May I was interviewed, I think it was May 18th if I recall, and the market started to turn lower after it had zero correction up until that point. I said, in the interview I said, look, let’s see how long this correction lasts. It could be a couple of days, a couple of weeks, or a couple of months, and that’s really going to determine how strong this bull market actually is. And that correction was only a couple of days long, then we hit new highs after that. Just recently, we’ve had another small correction and now we seem to have a resumption to higher prices. First Majestic hit a new multi-year high, just yesterday, which was quite exciting. It’s a totally different market.

I travel around the world, as you probably know, and I talk to institutional investors worldwide. What I’m hearing from a lot of investors out there is that they’ve misjudged this market, they have not come into this market. And a lot of money is still sitting on the sidelines waiting to come in. And I think that’s why these dips and these corrections are so shallow.

Mike Gleason: Yeah, they certainly have demonstrated a lot of resiliency. Like you said, the corrections have been quite shallow. Now First Majestic has had a fantastic year so far. You just eluded to that a moment ago. Your share price is up more than 400% year-to-date. Gosh, Keith, it was around 3 and a half bucks when we spoke to you in February and now it’s up at $18 a share. So before I go any further, congratulations on achieving some really amazing returns for your investors.

Now one of the dynamics that I’m sure has driven this exponential growth for First Majestic, and other miners as well for that matter, are the dramatic gains in silver on a percentage basis. We’ve gone from less than $14 a ounce when the year began to over $20 an ounce as we’re talking here on August 3rd. So it’s gone up over $6. And I would think that almost all of that would go straight to the bottom line. Is that fair to say? Have you done the calculations on what it means to your profitability for say every dollar silver goes up in price, Keith?

Keith Neumeyer: Yeah, our costs are relatively fixed. One thing that you should be aware of is that we have been starving our mines of investment, exploration and development dollars, over the last 3 or 4 years because the focus has been to preserve cash, preserve the treasury, in order for us not to have to go to market to finance the company at ridiculously low share prices. I think we did a pretty darn good job doing that.

And you’re right, most of the increase in the silver price goes right to the bottom line. And at our level of production, we’re producing around 20 million ounces of silver equivalent annually. For every dollar, that’s $20 million extra in revenue. And we’ve seen a $6 increase in the silver price over the last 6 months, so those numbers are huge. The amount of dollars that are actually coming to the bottom line now, the amount of profits that we’re generating are enormous because literally 90% of that money goes to the bottom line. But look, we’re looking forward to reinvesting some of this capital. It’s now, because of the robust cash flows or profits are coming into the business, we’re looking at expanding the company again, which is going to be pretty exciting because over the last 5 years, we haven’t been able to look at expansion.

Mike Gleason: That leads me right into my next question. One thing we’ve seen here in the retail market, for silver especially, is that now that we’re over $20 an ounce in silver, we’re seeing retail demand decline, which tells us that maybe the last 4 or 5 tough years for metals investors have spooked the small group of folks, relatively speaking, who’ve already invested silver and maybe many of these folks may not believe this rally has legs. First off, how confident are you that higher prices are still ahead in the next year or two? And then has that improved environment resulted in more aggressive exploration by you and/or others? It sounds like maybe it has.

Keith Neumeyer: It’s a slow process. Look, I’m a bull on the metals. This bull market has resumed. We’re going to see much, much higher silver and gold prices over the next 1 year, 2 years, 3 years, 5 years. No one knows how long the bull market is going to last again. We had a 10-year bull market that went from 2002 to 2011, 2012. We turned into a very deep bear market that last almost 5 years. Who knows where we’re going to be going, but I’m pretty confident that we’re going to see new highs in both gold and silver.

I look at a couple of things, and this is how I determine that. If you go back and look at where the last bull market started, you look at 2002, we had $5 silver prices and we had $250 or $300 gold. Gold went to $1,900, which is basically is almost 7 times. And we went to $50 on silver, which is almost 10 times. If you use $13.50 as the low on silver, that’s $135 silver if the same ratio was to repeat itself. And that’s multi-thousand dollar gold prices. And that’s what I’m expecting to see. It’s hard to imagine those kinds of prices when we’re at where we are today, and it may even seem silly or somewhat ridiculous to talk about prices at those levels, but I’m pretty confident that looking back, 3, 4, years from now, looking back at this time, we’re going to be shaking our heads, probably wishing we would have been a little bit more aggressive.

That’s why I put together my new company, First Mining Finance. We bought 8 companies over a 13-month period from April of 2015 to early this year, March, April of 2016. I did that on purpose. I did that because the valuations were so low and my expectations of what’s going to happen to the metal prices in the coming years.

Mike Gleason: Now Keith, we know you’re not a big fan of the futures markets being the primary mechanism for price discovery in the metals. You’ve been quite outspoken about the shenanigans that have gone on there. Certainly, there is something broken about a system where a handful of bullion banks can sell a bunch of ounces on paper representing a very finite resource like silver and creating those contracts in virtually unlimited quantities. It’s the producers who suffer the most if prices are held artificially low.

So far this year, however, renewed speculative interest in the metals is driving prices higher. Now what’s interesting is that there is an extraordinary surge in the quantity of metal actually being delivered on COMEX contracts, especially in gold. It makes us wonder if these developments are making the short sellers nervous about selling much more paper silver. What are your thoughts on the recent action in the futures markets?

Keith Neumeyer: It’s pretty interesting. We’re reaching extremes that we’ve not seen historically. Usually the commercials are right. If you go back at least 15 years, since I’ve been really following it, the commercials are the ones that seem to make all the money. There was a saying, “just follow the commercials and you’ll do okay.” This time around, are they wrong? I don’t have an answer to that question, but it’s sure looking like a desperate situation.

With the metals not wanting to correct, I think it’s pretty exciting for investors. There’s definitely the potential there that we can see, finally, the market squeeze out some of these manipulators, some of these short sellers, who’ve been screwing around in this market for decades and making fortunes on the back of retail investors as a result.

Mike Gleason: Since we spoke last, the Shanghai Gold Exchange announced a fix for gold as an alternative for the London fix. A silver fix may be coming and many hope price discovery will be improved there, which is to say more closely related to supply and demand of the physical market. It isn’t clear to us what to expect. Can you give us your thoughts about the Shanghai Gold Exchange?

Keith Neumeyer: Well, quite honestly, I think that’s why we’re not seeing the big spike down that we’re so used to seeing. I remember, well everyone remembers, going back over the last 10 plus years where we would wake up one day and lo and behold gold is down 50 bucks in one day and silver is down a buck in one day. And it’s always on one of these very illiquid days or right at the end of the month when they need print a certain price so that their books look good for quarter-end or month-end or whatever they’re trying to achieve.

It’s just the shenanigans that everyone got used to. You roll your eyes when it happens (you say) “oh geez, they’re doing it all over again?” And the regulators are just sitting back and watching and doing nothing about it. And the retail investor just has to accept all the nonsense that goes on without anyone coming to the rescue as they should be.

And now we’ve got a new player in the marketplace. And I think as we do see more and more players enter this market, and the silver fix obviously comes in, it’s going to be more difficult for the same kind of games to be played. And I think it’s very exciting. And I’m hopeful that we’re going to see, finally, proper price discovery as a result of the new players coming into the market.

Mike Gleason: Last year you announced that First Majestic would hold back some of its production because prices were so cheap. You urged others in the mining community to do the same, although I remember you saying you didn’t have much success at all in recruiting others to do likewise. So have you now sold some of that 2015 production at these higher prices, now that prices have risen above $20? Are you still holding back production or are you now willing to sell all the silver you produce as well as those reserves you built up? Basically, how has that move to hold back some of what you produced last year worked out for you, Keith?

Keith Neumeyer: We did it a few times, 3 times, I believe, to be exact. And we’re now out of those positions. We have taken advantage of the higher metal prices. It’s helped the company dramatically. Our treasury today is somewhere around 110 million U.S. dollars. It’s the highest it’s been in 5 years. So we’re very excited about the amount of capital that we have in our treasury. And that’s going to allow us to start investing in the business and start building the business. I think, ultimately, that’s really what investors want us to do. We’ve got a couple of mines that can be expanded. We’ve got a couple of development projects that should be operating mines and will be operating mines over the next 3 to 5 years. That’s where our focus will be and I think it’s going to be welcomed among our shareholders.

Mike Gleason: Yeah, I have to think that some of your cohorts there who didn’t go along with you are probably wishing maybe they had. Keith, you spoke to a reporter from Bloomberg about a major Japanese electronics manufacturer who approached First Majestic about the possibility of buying silver direct, which implies they’re concerned about silver availability. Why do you feel this is significant and have you heard about more of these kinds of inquiries? Also, more generally, are you seeing any other signs that refiners and manufacturers are worried about finding an adequate supply of the raw metal?

Keith Neumeyer: Well, you know, that was an interesting situation. First Majestic I founded 14 years ago and I’ve said a number of times that this is the first time ever that we were approached by an electronics manufacturer for a silver supply. So I think that’s quite significant. Nothing has happened yet. We’re haven’t entered into any agreements, nor do I know whether we’re going to do it. There’s still the possibility that it could happen.

But the approach did occur and I think that means something. These users of the metal I don’t think would be going directly to the source if there was not problems within the supply chain, or at least perceived problems or potentially a perception of future problems. I’m not in their board room so I can’t tell you exactly what their rationale is, I can only speculate. But talking to some on the gold side, I know that the refineries in Switzerland, for example, where a lot of the gold goes through, that goes into Asia, are clamoring for gold. There is definitely a tightness in the silver space which I’m very familiar with, obviously, but there also is a tightness in the gold space as well.

Mike Gleason: We saw industrial users for a certain precious metal, palladium, hoard large amounts of it, gosh, I think it was around the turn of the century here when there was possible shortages in that metal. Electronics manufacturers, for instance, they’re using a very small amount of silver in their products. The price of silver really doesn’t affect them at all, but they’re going to be darned if they’re not going to be able to get it. Shortages beget shortages, as the saying goes, so that would be very interesting to watch play out because these industrial users are not going to be putting themselves in a position where they can’t be getting silver. So it certainly is interesting that you were approached by those folks. Is that one dynamic you think we could see, just based on the amount of silver that’s out there and the amount of people that want it?

Keith Neumeyer: I’ll throw in a couple of stats. One that I look at is the ratio of mining and the ratio where we’re trading. We’re mining on a global scale right now, silver to gold, 9 to 1. So for every 9 ounces of silver, we’re mining 1 ounce of gold. We’re currently trading in the low 60 ratio. So how do you trade at 60 to 1 or 65 to 1 when you’re mining 9 to 1? That makes no sense to me. We’ve been in a deficit for multi decades now. The above ground supply of the metal is very, very low. It’s actually at historic lows.

Another interesting dynamic that I point to is the lack of silver companies. When I put First Majestic together, there was actually a handful of true silver companies. And I look at a company that calls themselves a silver company as a company that has more than 50% of their revenues from the sale of silver, then, legitimately, I think they can call themselves a silver company. Well there’s only one company in the world, major company in the world, that has 50% of their revenues from silver and it’s First Majestic. We have about 70% of our revenues from the sale of silver, the rest being a little bit of gold and a little bit of lead and a little bit of zinc. It’s impossible to be 100% because every mine’s got some other metal, but to be that pure is actually extremely rare.

The question I have is why in the space, and there’s about 12 or 14 companies that call themselves silver companies, why do these companies have less than 50% of revenue from the sale of silver? You can talk to many of the CEOs of these companies, I’m not going to name names, but they’re going to tell you that the reason why they ended up becoming gold companies is because they could not find good silver mines. First Majestic, over its 14 year history, has been able to accumulate one of the most interesting portfolios of silver assets in the world and has become the second largest silver producer in Mexico as a result of this portfolio. And our focus is to remain as pure as possible so when investors want to buy a silver company, they can come to First Majestic.

Unfortunately, they get sucked into some other companies that call themselves silver companies that simply are not silver companies, but that tells me that these silver mines are way rarer, silver is way rarer, than people actually think it is. So I think we’re going to see huge ratio collapse. I’m looking for a ratio closer to 9 to 1 where the actual mining ratio is because that’s where the financial number, that’s where silver prices should be. It should be 9 to 1.

Mike Gleason: Certainly. We saw the ratio I guess down to about 32 to 1 in 2011. The classic ratio they say is in the teens, 15, 16 to 1, but yeah, we may see it as low as 9 or 10 to 1. That would be very bullish for silver’s future.

Well Keith, as we begin to close here, I want to get your thoughts on what you expect as we move further into the second half of the year here. There’s a lot of uncertainty in the world, a big election coming up this November that has a lot of people watching and perhaps concerned and nervous about the future and what’s going to happen. How do you see the metals performing in that environment? Will we see follow through from the wonderful first half that we’ve had here in 2016?

Keith Neumeyer: Well definitely there is going to be follow through. We’re going to go all the way into September, October, November here, which are generally pretty strong months for the precious metal and mining stocks. And I don’t see any reason why that’s going to be any different. We’re going to go into the elections. We’re seeing Europe fall apart in front of our eyes and we’re seeing the political environment around the world become more destabilized. Quite honestly, the world is probably the least safe that it’s been probably in the last 2 or 3 decades, which is very unfortunate. And I think all that is going to contribute to higher gold and silver prices.

But predicting where we’re going to go is a little bit of a fool’s game. And quite frankly, I’ve been wrong. I would have never predicted silver would have gone from $50 an ounce to $13.50, nor gold go from $1,900 to $1,050. I wish I had predicted that… we would have done a few things differently. But we’re now back into a bull market. A few months ago I predicted, that silver would hit $20 by the end of the year and that’s me being conservative because we’ve been beaten up so badly over the last 4 or 5 years, and sometimes being conservative is sometimes a better approach. But now I’m a little bit more comfortable, obviously. We’re obviously at $20 silver. We’re at $1,350 gold, currently.

I think, quite honestly, there’s a chance that we’re going to see $25 silver by the end of the year and then we could likely see $1,500 or $1,600 gold by the end of the year. Maybe those will prove to be too optimistic, but if it doesn’t happen between now and the end of the year, it’s going to happen sometime within the next 12 months. So I’ll be patient and continually build both First Mining Finance and First Majestic as the market allows us to continue to build these businesses.

Mike Gleason: Well, Keith, I can’t thank you enough for sharing your insights and your firsthand accounts of what’s going on in the silver mining industry. We really appreciate your time and wish you continued success. Now before we let you go, please tell our listeners how they can get more information on First Majestic and also, since we didn’t talk too much about it, First Mining Finance (OTC:FFMGF) (CDNX:FF.V), because I know you continue to see a lot of interest from investors wanting to get involved with that new venture.

Keith Neumeyer: Both the websites obviously. First Majestic Silver is just simplywww.FirstMajestic.com. First Mining Finance is www.FirstMiningFinance.com. You can follow me on Twitter, Keith_Neumeyer. I don’t do a lot of tweeting, but at least if you follow me, you’ll get all of First Mining’s news releases and First Majestic’s news releases and the industry-type bulletin that goes out that some of your listeners may be interested in. Those would be the best places to go. Or you can even phone either of the companies, investor relations fellows there, Todd Anthony and Derek Iwanaka, would be happy to talk to anyone that calls in.

Mike Gleason: Well thanks again Keith. We sincerely appreciate it. We would love to catch up with you again down the road. And I hope you have a great weekend and take care.

Keith Neumeyer: Yeah. Thanks very much for your time, Mike.

Mike Gleason: That will do it for this week. Thanks again to Keith Neumeyer, Founder and CEO of First Majestic Silver Corp, ticker symbol AG.

Gold picks up a little after BoE drops interest rates, adds stimulus

Gold TodayGold closed in New York at $1,358.10 on Wednesday after Tuesday’s close at $1,364.50.  

    • The $: € was up at $1.1135 from $1.1197.
    • The dollar index rose to 95.67 from 95.09 Wednesday.
    • The Yen was weaker at 101.48 from Wednesday’s 101.06 against the dollar.
    • The Yuan was weaker at 6.6409 from 6.6291 Wednesday.
    • Yuan Gold Fix

 

Trade Date Contract Benchmark Price AM Benchmark Price PM
2016  08  4

2016  08  3

SHAU

SHAU

289.78

291.04

289.08

291.42

Dollar equivalent @ $1: 6.6409

$1: 6.6291

$1,357.22

$1,365.55

$1,353.94

$1,356.11

Shanghai prices saw prices consolidate at lower levels ahead of the Bank of England’s statements today. But the main driver of the day was a correcting U.S. dollar in what we see as a normal market reaction to its recent weaknesses.

LBMA price setting:  $1,351.15 after Wednesday 3rd August’s $1,364.40.

The gold price in the euro was set at €1,213.75 up €4.46 from Wednesday’s €1,218.21.

Ahead of the opening in New York the gold price stood at $1,356.90 and in the euro at €1,219.03, but moved back up to over $1,360 as trading progressed.

Silver Today –The silver price closed in New York at $20.41 on Wednesday down from $20.61 on Tuesday.  Ahead of New York’s opening the price was trading at $20.32, but again silver advanced during the day to stand at around $20.38 at midday in New York.

Price Drivers

The Bank of England lowered interest rates by 0.25% and said it had scope to do more if needed, including taking the key rate close to zero, they also announced a plan to lend as much as £100 billion ($132 billion) to banks to ensure the measures reach the real economy. In addition, the Monetary Policy Committee will buy £60 billion of government bonds over six months and as much as £10 billion of corporate bonds in the next 18 months. In total, the balance sheet could expand by £170 billion.

The bank cut its growth forecast for next year to 0.8% from 2.3% and lowered its 2018 prediction to 1.8% from 2.3%. The pound dropped over a percent to $1.3135 immediately after the statement, but this still higher than its level immediately post the Brexit vote..

The dollar’s performance is largely going unnoticed as it continues to trade between 95 and 97 on the dollar index. On the basis of its economy’s performance it should be much stronger. On the basis of its Trade balance the dollar should have collapsed long ago, but the U.S. accounts as the dominant world power which has made the dollar a haven for all other currencies. But this situation is starting to change as its role as the sole currency with which to pay for oil is changing, as is its role as the last resort currency haven. The credibility of currencies as the monetary expression of government is weakening in line with the destabilization of the monetary world.  Gold is not a monetary alternative for many reasons, but it is a vehicle with which to shore up confidence, particularly if it can be eliminated as competition to currencies.

Gold ETFs – In New York on Wednesday there were sales of 0.052 of a tonne sold from the SPDR gold ETF but no change in the Gold Trust holdings. This left their respective holdings at 969.648 tonnes and 219.65 tonnes.

Silver –Silver prices were more cautious today than gold prices ahead of the Bank of England’s announcement.

Julian D.W. Phillips

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

Gold and silver prices in positive run

Gold TodayGold closed in New York at $1,353.30 on Monday after Friday’s close at $1,353.30.  

    • The $: € was down at $1.1197 from $1.1175.
    • The dollar index fell to 95.42 from 95.64 Monday.
    • The Yen was stronger at 101.69 from Monday’s 102.20 against the dollar.
    • The Yuan was stronger at 6.6358 from 6.6415 Monday.

 

  • The Pound Sterling was stronger at $1.3231 up from Monday’s $1.3179.

 

Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
2016  08  2

2016  08  1

SHAU

SHAU

288.69

288.65

289.32

287.95

Dollar equivalent @ $1: 6.6358

$1: 6.6415

$1,353.15

$1,351.84

$1,356.11

$1,348.53

Shanghai prices took New York’s close higher still and London even higher.

We are seeing the Yuan strengthen against the U.S. dollar but staying in line with other currencies. The People’s Bank of China is not focused on the dollar but on the broad basket of currencies of its trading partners. The PBoC wants a stable to weakening Yuan and that despite what level the dollar will reach at some point this year.

We previously mentioned that the Yuan would weaken against the dollar to bring it into line with other global currencies against which the dollar had risen. But now that the dollar itself is weakening we are lowering our sights on where the Yuan will be by year’s end. We see it stronger than 7.00 to the dollar [weaker means more Yuan to the dollar] by year’s end.

LBMA price setting:  $1,358.15 after Monday 1st August’s $1,348.85.

The gold price in the euro was set at €1,212.63 up €4.42 from Monday’s €1,208.21.

Ahead of the opening in New York the gold price stood at $1,357.50 and in the euro at €1,212.81.  

Silver Today –The silver price closed in New York at $20.43 on Monday up from $20.34 on Friday.  Ahead of New York’s opening the price was trading at $20.68.

Price Drivers

Ahead of Thursday’s expected rate cut in the U.K. [and likely more QE] we have the announcement from the Japanese government we expected to come and mentioned yesterday. $273 Billion worth of stimuli! The details will follow. And yet we are seeing the Yen continuing to strengthen towards 100 and possibly lower in the days ahead.

It is clear that the Bank of Japan has come to the end of its road and that the government must step up to the plate now. Its demographics are against it as is the age of its population. Disinclined to spend and focussed on less spending, not more, as it ages, the population will not run out to support growth. The Abe government seems to be facing an intractable situation, worse than, but similar to, many other countries in the developed world.

After years of efforts to combat deflation, many now believe that the current round of stimuli will not change the picture of the deflating Japanese economy.

Gold ETFs – In New York on Monday there were purchases of 5.937 tonnes bought into the SPDR gold ETF (GLD) and a purchase of 0.51 of a tonne into the Gold Trust (IAU) leaving their holdings at 964.032 tonnes and 219.70 tonnes, respectively.

The U.S. buying of physical gold via the U.S. based gold ETFs has begun again in earnest. If it continues at this rate gold and silver prices will move through overhead resistance!

Since January 4th this year, the holdings of these two gold ETFs have risen by 386.117 tonnes.

Silver –Silver prices are consolidating alongside gold and at the same pace today. Tomorrow may see it resume its characteristic vigor. The market has a positive tone.

Julian D.W. Phillips

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

Gold up, Silver up, GLD returns to taking in gold

Gold TodayGold closed in New York at $1,351.30 on Friday after Thursday’s close at $1,337.00.  

  • The $: € was down at $1.1175 from $1.1086.
  • The dollar index fell to 95.64 from 96.37 Friday.
  • The Yen was stronger at 102.20 from Friday’s 103.38 against the dollar.
  • The Yuan was stronger at 6.6415 from 6.6525 Friday.

Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
2016  08  1

2016  07  29

SHAU

SHAU

288.65

286.98

287.95

286.01

Dollar equivalent @ $1: 6.6415

$1: 6.6525

$1,351.84

$1,341.76

$1,348.53

$1,337.23

Shanghai prices were slightly lower but London stayed in line with Shanghai’s close. Shanghai continues to remain in synch with both New York and London despite the fact it is a far, far bigger physical gold market than the two put together. The Chinese appear to be quite happy to let the two smaller markets make the gold and silver price. But for how long?

LBMA price setting:  $1,348.85 after Friday 29th July’s $1,332.50.

The gold price in the euro was set at €1,208.21 down €8.89 from Friday’s €1,199.32.

Ahead of the opening in New York the gold price stood at $1,348.05 and in the euro at €1,207.39.  

Silver Today –The silver price closed in New York at $20.34 on Friday up from $20.22 on Thursday.  Ahead of New York’s opening the price was trading at $20.50.

Price Drivers

This week at noon [U.K. time] on Thursday, the Bank of England reveals its stimulus package on the U.K. having garnered the first impact of Brexit on the U.K. economy. The data suggests a near-term stagnation with a high risk of recession. An interest rate cut of 25 basis points and an expansion of the Q.E. program is on the cards. This event is likely to hang over the market until it happens.

With the Pound already down over 10% since Brexit, we expect more falls to come, with a positive reaction in the gold price not only in sterling but in the dollar as well.

Some months ago now we called the end of the dollar bull market and have proved correct since then. Today, we see the dollar moving back towards its lows since we made that call, but only now are we hearing others beginning to join us, including a major U.S. bank. We see this as happening because of the impact the global economy will have on the U.S. and a treasury preference towards a weaker dollar.

Once again we are hearing talk in Japan of more stimulus, this time from the government. But despite all these efforts the Yen is strengthening. But this is not strength for positive reasons. We are not seeing Japan grow and we are not seeing deflation defeated despite all the government’s three arrow efforts.

Global growth is still shrinking, as well described by U.S. growth, last week. Gold is being recommended by more and more institutions now.

Gold ETFs – In New York on Friday there were purchases of 3.86 tonnes bought into the SPDR gold ETF (GLD)  and a purchase of another 0.6 of a tonne into the Gold Trust (IAU) leaving their holdings at 958.095 tonnes and 219.19 tonnes, respectively.

Since January 4th this year, the holdings of these two gold ETFs have risen by 379.67 tonnes.

Silver –Silver prices showed a different volatility today, jumping up to the mid-$20 area as gold prices recovered nearly $20, on Friday. Repeat – We expect this volatility to continue in the days to come.

Julian D.W. Phillips

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