ECB stimulus: Gold and silver up, Euro still stays strong

Gold Today –Gold closed in New York at $1,265.50 on Wednesday, falling in London at the opening on Thursday morning.

The $: € moved from $1.1346 to $1.1340 overnight. The dollar index is standing at 93.89 up from 93.71.

LBMA price setting:  $1,258.35 up from Wednesday 8th June’ $1,252.40.

With the European Central Bank’s Mario Draghi beginning his next phase of monetary stimulus the concept of ‘helicopter money’ comes to fruition. A fear that, when one has deflation [and actions to stimulate inflation that fail point to heavy deflation] and such a stimulative policy going on, deflation accelerates because of the excessive supply of new money. A look at the Weimar Republic’s hyperinflation showed how the two joined forces to accelerate inflation. While we don’t think that today’s action will lead to hyperinflation, such policies do eventually result in considerable economic damage.  We believe that the road to that result has begun. Gold and silver prices are the natural beneficiaries as currency values decline heavily.

But the U.S. will act to prevent a strong dollar from resulting as this will hurt the recovery there. The weapons to keep the dollar strong against the euro will prove insufficient eventually, if ‘helicopter money’ issuance grows much more.

The gold price in the euro was set at €1,108.19 up from yesterday’s €1,101.69

Ahead of New York’s opening, the gold price was trading at $1,260.30 and in the euro at €1,113.78.

Silver Today –The silver price closed in New York at $17.05, up from Wednesday’s $16.40 a rise of 65 cents. Ahead of New York’s opening the silver price stood at $16.99.

Price Drivers

Mario Draghi made it abundantly clear that Monetary policy can do only so much and that structural reform must be undertaken to make monetary stimuli work well. The decision to buy Corporate Bonds, we feel, is going too far, as this will bring such yields down to zero and likely below into negative territory.

The evidence of QE both in Japan and the Eurozone to date has been disappointing in terms of delivering economic growth. There is a good case to say that at least it has staved off deflation, which will grow again, if stimulation is halted. Hence, such current stimulus is only a temporary solution, at best.

It is unlikely that there will be a synthesis of structural reform policies within the E.U. in the near or foreseeable future due to the structure of the E.U.  The bubbles that are being formed in the bond markets will burst, the moment interest rates are hiked.

Gold ETFs – On Wednesday the holdings of the SPDR & gold Trust stood still, once again, leaving the holdings of the SPDR at 881.145 and those of the Gold Trust at 196.90 tonnes.  There is media talk that gold is being bought. We can accept that this is so in the E.U. but U.S. demand is quiet as they analyse the way forward for the U.S. The gold price is rising

Silver –The silver price is going full pelt upwards. When gold pulls back silver pauses, when gold rises slightly silver will sprint ahead.

 

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

 

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Enormous impact of ICBC’s Barclays London gold vault purchase

Gold TodayGold closed in New York at $1,274.40 on Monday up from Friday’s $1,273.70. On Tuesday morning in Asia it held at $1,275, as most exchange rates were close to yesterday’s levels.

LBMA price setting:  $1,270.10 down from Friday’s $1,281.00.

Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
2016  05  17

2016  04  16

SHAU

SHAU

268.64

268.68

267.85

269.39

Dollar equivalent @ $1: 6.5475

+$1: 6.5492

$1,276.16

$1,276.02

$1,272.40

$1,279.39

Yesterday and today saw global gold markets moving closely together. A glance across the currency world as well as the gold world shows a tightening of the trading range of currencies and the continued consolidation of gold. We are seeing a sideways movement in prices ahead of a very strong move, soon.

The dollar index is almost unchanged at 94.54 barely changed from yesterday’s 94.53. The dollar is also slightly stronger against the euro at $1.1323 again barely changed from Monday’s $1.1325.

The gold price in the euro was set at €1,121.70 down from Monday’s €1,131.13.

Ahead of New York’s opening, the gold price was trading at $1,273.05 and in the euro at €1,124.70.  

Silver Today –The silver price closed in New York on Monday at $17.14 higher than Friday’s $17.10. Ahead of New York’s opening the silver price stood at $17.09.

Price Drivers

In what would seem to be the most remarkable piece of news to hit the gold market since the start of the Shanghai Gold Fix: After buying the Deutsche Bank lease to their 1,500 tonne gold vault China’s ICBC has now bought the Barclays gold vault in London. We can’t properly cover the full impact of this news in this daily report, but do so in our newsletters. But think about it. The 1,500 tonne capacity Deutsche Bank vault was not enough. The Barclays vault has a capacity of 2,000 tonnes. The total 3,500 tonnes capacity represented by the two vaults is around the size of Italy’s, Germany’s, France’s gold reserves. It is just under half of the gold reserves of the U.S.A., of over 8,000 tonnes, which accounts for over 70% of the U.S. foreign exchange and gold reserves. It’s massive in the context of the gold world. We have written on this before in our newsletters but will now add a clear picture of what we see lying ahead, in the next issues.

A question we would like the answer to is, “What volume of client gold are they now managing and what plans do they have for their own holdings in London?” The existing client’s gold stored in the vaults will not be affected and we doubt the service will. But they are in a position to be the dealer for these clients and will act accordingly. This confirms their market-making role. But it also describes their increasing control over the London gold market.

What is for sure is that any investor in gold and silver badly needs to understand the Shanghai Gold Exchange and Chinese gold markets if they want to understand the gold market.

It is no longer about COMEX’ views on the U.S. economic scene!

Gold ETFs – Monday saw purchases of no purchases or sales of gold bought into the SPDR gold ETF or the Gold Trust. This leaves their holdings at 851.132 and 198.38 tonnes in the SPDR & Gold Trust, respectively.  

With the absence of more gold purchases into the gold ETFs the market pulled prices back. Perhaps dealers were marking prices higher in anticipation of more buying, but, because it didn’t come, prices are tight and prepared for sellers or buyers.

As an aside, HSBC has a global footprint, but was originally the Hong Kong and Shanghai Banking Corporation. Its restructuring plans and action to date is to have a more Asian focus. HSBC is the custodian of the SPDR gold ETF holding its gold. The influence of China in the gold world is becoming dominant.

Silver –The Silver price continues to hold over $17.00 waiting for gold to move.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

Gold rises, silver soars – but……

Gold TodayGold closed in New York at $1,245.80 on Wednesday. On Thursday morning in Asia, it jumped up to $1,258 and London followed through to set it at the LBMA price setting at $1,257.65, up from $1,247.75, on Thursday.

The dollar index is higher today, at 94.45 down from 94.05 on Wednesday. The dollar is stronger against the euro at $1.1315 down from $1.1366 Tuesday.

The gold price in the euro was set at €1,111.49 up from €1,097.57 Thursday.

Yuan Gold Fix

The Shanghai PM gold benchmark price was 261.82 yuan per gram – around US$1,256.22 at the latest $/yuan exchange rate.  Again this is not hugely different from the LBMA figure which again suggests that for the moment China is not trying to front run the market.

Ahead of New York’s opening, the gold price was trading at US$1,267.30 and in the euro at €1,117.30.  After hitting a little over $1,270 in spot trade it has since been brought down very sharply indeed and at the time of publication had fallen back to below $1,250.

Silver Today –The silver price closed in New York higher at $16.97 on Wednesday. Ahead of New York’s opening the silver price stood at $17.60.

Price Drivers

The gold price is breaking through overhead resistance solidly on a daily basis. This is remarkable in the light of ‘stale’ bull selling. As you can see below the last two days has seen significant sales from the SPDR gold ETF, but this has not dented the price rise, implying that there is considerable underlying strength in the gold price. At the moment this is not due to a weak dollar as the dollar is stronger today.

It is the day when Mario Draghi makes a statement from the E.C.B. He is not expected to raise interest rates in the light of the very weak levels of growth and inflation. The continued narrowing of company margins, lower turnovers and the castigation of Spain for not following through on structural changes by the I.M.F., makes the future darker than has been seen for some time. Pressures on the E.U. remain discouraging to the extent that the U.S. Fed is looking at the global picture when contemplating rate hikes.

With debt level burdens across the world far too high [and at disturbing levels in China there are growing concerns of debt default, particularly in the corporate sector. And it is into that sector that money is flowing in the hopes of capturing yields which cannot be found in the interest rate markets across the globe. This is not the traditional reason for buying equities. Expectations of growing yields, drives demand for equities, not a retreat from interest rates.

Gold ETFs – In the last two days, we have seen sales of 7.43 tonnes from the SPDR gold ETF and sales of 0.48 of a tonne from the Gold Trust. This leaves their holdings at 805.032 and 187.56 tonnes in the SPDR & Gold Trust respectively.  

Silver – The silver price is amazing all as it continued to soar. Since yesterday it has risen 3.71%. It does appear to have a very long way to go up still, running ahead of the gold price. While the two metals are usually treated as monetary metals [alternatives to currencies] silver’s historic price performance is far more vigorous than gold and far more volatile. It is a narrower market than gold, which has many facets in its monetary role. Nevertheless, right now retail investors as well as institutional investors note its historic performance [peak $50 an ounce] and Technical background which points to a sterling performance.  But again, like gold, it has been brought back very sharply from its early high of $17.79.  At publication it had fallen back a full dollar.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

Silver chomping at the bit as currency world in turmoil

Gold Today Gold closed in New York at $1,225.20 down from $1,243.20 on Thursday. On Friday morning in Asia, it picked up and rose even more in London to be set at $1,229.75 at the LBMA price setting down from $1,240.30 on Thursday.

The dollar index is lower at 94.79 down from 94.95 on Thursday. The dollar is weaker against the euro at $1.1277 up from $1.1256 yesterday.

The gold price in the euro was set at €1,090.49 down from €1,101.90 Thursday.

Ahead of New York’s opening, the gold price was trading at $1,230.55 and in the euro at €1,091.20.  

Silver Today –The silver price closed in New York at $16.13, down 10 cents on Thursday’s close. Ahead of New York’s opening the silver price stood at $16.22.

Price Drivers

Both the dollar and the euro have stabilized slightly and gold is narrowing its trading range, promising to tighten further before another strong move either way.

But the currency world remains in turmoil. Quantitative easing continues in the E.U. from the E.C.B. [despite objections now coming from Germany] with more to come.

In Japan we see a sad scene developing as Japan is about to inject more stimuli into their economy too, despite clear signs that Abenomics is not succeeding. We don’t use the word failing, because Japan has to keep stimulating so that word isn’t used, even though it is the visible reality. If such an admission came from government the damage may be considerable. With negative interest rates already in place the Japanese investor is turning to gold.

Next Tuesday sees the arrival of the Shanghai Yuan gold Fix. With China the largest buyer of physical gold at individual, institutional and government level, in the world on a daily basis, this event is a structural change in the world of gold.

To date the world has always measured the rises and falls of the gold price in the U.S. dollar, despite the fact that in every country, locals use their local currency to buy or sell gold, leaving it both rising and falling depending on the individual currency’s performance.

We expect that the first action in the morning from the 19th onwards will be to ‘translate’ the gold price back into the dollar, to see if it has risen or fallen. But in the process we will be forced to see what move the Yuan has had against the dollar.

We have seen reports that the price will be smoothed out by arbitrageurs, but this ignores the fact that exports of gold are not permitted from China, while imports are.  So gold can be bought in London and New York by Asia but the reverse cannot happen. But we are of the opinion that China can provide a smoothing out ‘facility’. The acceptance of the Chinese Bank ICBC as a London ‘market maker’ means that it will be both a buyer and a seller of gold [and has been so for more than three months to date].

The factors when added together, show just how much ability to dominate the global gold price China has. There are other features behind China’s gold market structural reforms that will bear heavily on the global gold market and price that are present too.

Gold ETFs – We saw more large sales of 3.27 tonnes after yesterday’s big sales of 5.053 tonnes of gold from the SPDR gold ETF but nothing in or out of the Gold Trust on Thursday. This leaves their holdings at 806.815 and 188.04 tonnes in the SPDR & Gold Trust respectively.  Once again these sales would account for the fall in the price in New York, with the price recovering in London to $1,230.

Silver – The silver price is chomping at the bit waiting to run and rising at the first sign of small recovery in the gold price.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

 

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Global Gold Price (1 ounce)
  Today yesterday
Franc Sf1,191.23 Sf1,200.00
US $1,230.55 $1,246.75
EU €1,091.20 €1,102.05
India Rs.82,022.31 Rs. 83,052.25
China Y 7,971.75 Y 8,070.46

 

Gold and Silver consolidating as U.S. dollar bull market ending

Gold Today Gold closed in New York at $1,225.00 down from $1,241.30 on Wednesday. On Thursday morning in Asia, it rose to $1,235. London pulled it back to see the LBMA price setting at $1,233.60 down from $1,238.30 yesterday.

The dollar index fell to 94.51 down from 95.84 yesterday. The dollar is weaker against the euro at $1.1380 after yesterday’s $1.1330.

The gold price in the euro was set at €1,085.39 down from €1,092.94 on Wednesday.

Ahead of New York’s opening, the gold price was trading at $1,235.85 and in the euro at €1,085.98.  

Silver Today –The silver price closed in New York at $15.22 down 11 cents on Wednesday. Ahead of New York’s opening the silver price stood at $15.40.

Price Drivers

The Fed – End of the Dollar Bull Market With gold now consolidating at current levels, the comments by Janet Yellen continue to impact global markets with equity markets surging and dollar continuing to slip against all currencies.

Please note, we were the first to call an end to the dollar ‘bull’ market.

This view is now spreading with Janet Yellen’s comments of concern on the global economy and the strong dollar confirming the ‘official’ view. The U.S. Treasury is silent, even though it is in their department, because we believe, that with the audience the Fed has in the media, the message was given full force when she gave it. It’s the end of the dollar’s bull market, because the Fed and the Treasury want that to be so.

The Fed is telling us all that the U.S. and its dollar cannot walk its own road with the rest of the world following. It’s very much a part of the global economy and will not tolerate other nations devaluing against it. This underpins the gold price and neutralizes the so called reverse link between the dollar and gold.

This now allows investors to look at the future prospects of markets with a clear eye and look at gold. They will see peaks in equity markets soon, as these rise on factors other than prospective growth. We are in a world where growth is expected to plateau or fall as equity market rises are caused by monetary factors, not genuine growth prospects. This makes them susceptible to volatility and uncertainty.

We are hearing more and more institutions considering gold and silver as alternatives to equities and other investments.

Gold ETFs For the second time in a long time we saw sales of 1.189 tonnes of gold from the SPDR gold ETF but none from the Gold Trust, yesterday. This leaves their holdings at 819.282 and 185.88 tonnes in the SPDR & Gold Trust respectively. These sales did not move the gold price, but may have acted as a restraint on the rebound.

Silver – The silver price remains locked onto gold’s moves and rose slightly yesterday, but promises more rises shortly.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

Gold consolidating, silver rising!

Gold TodayGold closed in New York at $1,256.00 on Friday not far different from a week ago. On Monday morning in Asia, ahead of London’s opening it was pushed down to $1,244.00. London then held it there until the LBMA price setting was set at $1,244.25 down from a week ago where it was set at $1,262.25.

The dollar index continues to see new low levels and this morning stood at 95.12 down from a week ago at 96.56. We continue to hold the view that the Dollar Index goes whichever way the Treasury wants and that’s not higher!

The dollar is down against the euro at $1.1277 from last week’s$1.1106.

The gold price in the euro was set at €1,103.30 down from €1,136.50 last week. Please note that the dollar is falling at the same time as gold is, contrary to ‘normal’ behavior.

Ahead of New York’s opening, the gold price was trading at $1,247.30 and in the euro at €1,106.06.  

Silver Today –The silver price closed in New York at $15.82 up over 26 cents on the week before. Ahead of New York’s opening the silver price stood at $15.85.

Price Drivers

We had a week away on holiday near the Mozambique islands, an ideal place to be cut off from the world and re-tune our perspectives. It allowed us to see just how diverse and inefficient the gold market is when assessing the validity of the gold and silver prices.

In the U.S. we see institutions and their clients, such as Goldman Sachs holding hard to their bearish view of the gold price, based entirely on the state of the U.S. economy and the number [3] rate hikes they expect from the Fed this year. They themselves are short as are their clients, so they are ‘talking their book’.

This view is entirely U.S. oriented and places its main emphasis on a stronger dollar and its past relationship with the euro. Of course the gold market is bigger than the U.S. demand levels, but due to market structure, U.S. gold markets continue to dominate the gold price, for now! On the other hand there are major developed world institutions [e.g. JP Morgan Chase that  favor gold’s rise, that have taken a bullish stance on the gold price for similar reasons, believing there will be only one or two rate hikes and a neutral to weaker dollar. Both these views expect the U.S. gold price to continue to dominate the global gold price and for the fundamentals on gold and silver to be sidelined and almost irrelevant to their prices.

We on the other hand do see the power of gold’s fundamentals coming through to the gold price once Chinese gold market moves come to fruition, post April 19thover time. We appear to be virtually the only commentators to add impact to their moves [we discuss these in depth in our newsletters [see below for addresses].

Gold ETFs There were purchases of 20.218 tonnes of gold into the SPDR gold ETF over the last week and purchases of 1.2 tonnes into the Gold Trust over the last week. The holdings of the SPDR gold ETF are now at 818.985 tonnes and at 192.72 in the Gold Trust. These now total over 1,000 tonnes between the two. This remains well below past peaks.

We are seeing large purchases spread over time, so as not to let the gold price run ahead of itself! This leaves dealers uncertain as to whether they are going to be caught wrong-footed when prices are marked up and they attract sellers or short-sellers. This continues to allow buyers to buy the tonnages they want at lower prices. We expect this policy to continue until another source of demand in the U.S. is found. We believe that it is these purchases that are keeping prices at these levels in the U.S. We remind readers that prices are made in the U.S. for gold and silver and do not reflect the global market’s demand and supply levels.

Hence we see prices low before the U.S. opens and high in the U.S. day.

Silver – The silver price is running ahead of gold as it rises then holds its gains while gold pulls back then runs when gold rises slightly. If this trend continues, silver will continue to outperform gold, for sure.

It is clearly visible that the usual source of silver [as a by-product of base metals] is falling, so supplies are dropping. But it the silver-gold ratio that is attracting market attention as it makes silver historically ‘cheap’.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance