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]

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Shanghai becoming dominant gold market

Gold TodayGold closed in New York at $1,266.40 down from Monday’s $1,288.20. On Wednesday morning in Asia it rose to $1,271.00, as the Yuan continued to weaken against a dollar that began to weaken against other currencies, before the LBMA price setting in London.

LBMA price setting:  $1,271.80 up from Monday’s $1,277.75.

Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
2016  05  11

2016  04  9

SHAU

SHAU

266.31

269.25

267.09

268.27

Dollar equivalent @ $1: 6.5377

$1: 6.5290

$1,266.98

$1,282.68

$1,270.70

$1,278.01

The Gold Fixing in Shanghai’s morning was the same as New York’s close. London’s opening was the same as Shanghai’s afternoon Fix giving the impression that the global gold market is in synch.

We find it hard to believe that New York saw six tonnes of gold purchased in the day and yet fell. China’s physical market continuing to see demand and the gold price rose later in the day, due to physical demand.

Take a look at currencies and we see a weakening dollar, a weakening Yuan and a stable sterling. This leaves Shanghai the dominant market in the last day. The Technical picture points to consolidation with a stronger bias, but only for today. Gold was sitting on support yesterday and moved higher in the day, in a typical consolidation pattern implying that dealers are moving prices based on this consolidation pattern.

The dollar index is at 93.98 down from Monday’s 94.02. The dollar is weaker against the euro at $1.1411 up from $1.1387 on Monday.

The gold price in the euro was set at €1,114.15 up from Monday’s €1,120.47.

Ahead of New York’s opening, the gold price was trading at $1,277.55 and in the euro at €1,119.58.  

Silver Today –The silver price closed in New York on Monday at $17.10 lower than Monday’s $17.45. Ahead of New York’s opening the silver price stood at $17.49.

Price Drivers

The jobs numbers from the U.S. last Friday were disappointing. In this environment it is most unlikely that we will see rate hikes anytime soon. What is for sure is that if there is no rate hike in June, U.S. demand for gold will rise again. We called the end of the dollar’s ‘bull’ run months ago. We continue to see it hold current levels or fall further. This is what the Fed wants!

The oil price will continue to fall because Saudi Arabia is pumping all it can until the frackers are out of business. This, we feel, has been their intention all along!

China’s reserves of gold rise – China increased its gold reserves 10.89 tonnes last month. We have come to expect around 21 tonnes a month increases over the last few months. We don’t think there has been a change in policy. As these reserves come mainly in the form of 400 oz bars, they would have to have been bought on the London market. We see China’s policy as taking what’s offered to them by dealers, so as to not chase prices. With the heavy U.S. demand ongoing, it may be that there was little on offer.

On top of that it is becoming clearer that not only is New York very low on physical gold, but London is moving that way. It appears that London is becoming more like COMEX every day, dealing in ‘paper gold’ on contracts that are closed out before they mature. That negates the need for physical gold.  

With Shanghai being a physical gold market, the osmotic pressure from China is on London and is slowly draining gold liquidity from there. If this continues, there will come a time when London loses its pricing power and passes it to China. And that may be sooner than we think! Bear in mind that the People’s Bank of China is the key counterparty and in a position to control prices now, in Shanghai.

Gold ETFs – Monday saw purchases of 5.052 tonnes of gold bought into the SPDR gold ETF and another 1.35 tonnes bought into the Gold Trust. This leaves their holdings at 839.246 and 197.78 tonnes in the SPDR & Gold Trust, respectively.  

The purchases of the last four business days totaled over 20 tonnes into these two gold ETFs and should continue to have a positive impact on the gold price.  HSBC, the custodian of the SPDR gold ETF has to buy physical gold in London when SPDR shares are bought, but when selling happens, they have a choice of where to sell, London of Shanghai. They cannot buy in Shanghai for U.S. delivery.

Silver – The Silver price continues stable and keen to move. It is chomping at the bit still.

 

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

More SPDR gold ETF purchases show continuing institutional interest

New York closed yesterday at $1,270.20 up $4.90. In Asia gold slipped slightly to $1,267.80 ahead of London’s. At the Fix gold was set at $1,264.00 up $0.24 and in the euro, at €1,103.641 down €3.067, while the euro was slightly stronger at $1.1453. Ahead of New York’s opening gold was trading in London at $1,265.00 and in the euro at €1,105.09.

The silver price closed at $17.30 down 6 cents. Ahead of New York’s opening it was trading at $17.27.

There were purchases of 5.376 tonnes of gold into the SPDR gold ETF but no change in the Gold Trust on Thursday. The holdings of the SPDR gold ETF are at 773.305 and at 167.75 tonnes in the Gold Trust.  The purchase yesterday was big enough to lift gold prices to current levels reflecting continued institutional interest in gold.

When we look at Europe, we see that specific political events don’t move precious metal prices by themselves. How those specific events impact the large monetary picture is what matters. Right now the euro is consolidating in the mid $1.14 area despite impending quantitative easing and the Greek debt negotiations, which should send the euro lower. That is, of course, provided the market is not discounting a Greek euro exit, which would strengthen the euro. As to Greece, the current chapter shows Germany in an avuncular manner putting the two Greek Ministers in their place, a big mistake, if they want the euro to remain intact. We do not believe the two leading Greek Ministers can take such a scolding quietly. In that scene, we now expect Greece, through these two politically committed men, to take that story up a notch.

With the Ukraine about to see its currency lose all credibility and the nation about to move to bankruptcy we are waiting to see if the U.S. and Eurozone are willing to take the Ukrainian civil war to an international one. Russia has made it clear it wants, at least, eastern Ukraine and will pay any price for it. This is well described by the exchange rate of the Ruble. The next week we see how far the West will go? It will affect the economic state of the Eurozone and may well eventually see a rupturing of gas supplies to Europe if the West takes the strife up to the next level. Only at that stage will it affect the gold price, we feel.

In China we are seeing the government increase liquidity in the system and aiding borrowers to lift growth. We cannot see China allowing deflation at this point in time, so will continue to follow the developed world by expanding their monetary base. We also expect to see them join the rest of the world by weakening the Yuan against the dollar. This continues to be gold positive.

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

Gold and silver in a different world today

Julian Phillips’ latest commentary on the gold and silver markets and geopolitical events in Europe.

The events in Greece are still being digested as the new party now has sufficient a majority to carry out its new role.  The I.M.F. has renewed its commitment to assist Greece, but with its usual terms, so the new government is likely to balk at such offers. With Greece’s debt now so large that country just cannot repay it, there seems little choice for creditors but to give this debt a major haircut. But Germany has renewed its intransigent position not to agree to such measures. The next week/month will be unstable as the political/financial battle rages.

With western democracy based on politics being separate from finances, such a battle goes to the heart of the Eurozone and not only that but to the structures operating in the western world. Which is more important, finance or politics? We will see which in the next few months.

A question that has also not yet been asked is, “Will China offer Greece financial assistance?”

With Russian debt no longer of a quality for central banks or others, after the credit downgrading to junk status by S&P, the insurgency in Ukraine, now a civil war, with Russia intervening, together with gas supplies being cut from Russia and the potential for major ruptures in the Eurozone, Russia is moving to a critical point, enhancing the growing divisions between Asia and the developed world.  The degrading of the situation in Russia can also ensure a recession in Europe, on top of its current difficulties. This is a very different world to 2014 already.

Market and ETF News

New York closed yesterday at $1,280.40 down $13.30. In Asia gold held that level. The Fix this mornin saw the gold price set at $1,279.00 down $3.75 and in the euro, at €1,132.961 down €8.58, while the euro was stronger at $1.1289. Ahead of New York’s opening gold was trading in London uncertainly, at $1,281.00 and in the euro at €1,135.69.

The silver price closed at $17.89 down 41 cents. Ahead of New York’s opening it was trading uncertainly at $17.90. It seems to want to fall quickly while the gold price is below $1,300.

There were purchases of 1.792 tonnes into the SPDR gold ETF as well as a purchase of 0.30 of a tonne into the Gold Trust on Monday. The holdings of the SPDR gold ETF are at 743.438 and at 167.84 tonnes in the Gold Trust. There was physical demand in the U.S. so the fall in the gold price is not on physical sales. Usually, when this happens, speculators and traders cannot hold the gold price down.

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