Surprise sale from GLD and strong U.S. jobs report knocks gold price back

Gold TodayGold closed in New York at $1,359.10 on Thursday after Wednesday’s close at $1,364.00.  In Asia the gold price also fell slightly further as you can see below  

  • The $: € slipped to $1.1075 down from $1.1066.
  • The dollar index was almost unchanged at 96.15 from 96.17 yesterday.
  • The Yen was slightly weaker at 100.55 from at 100.00 against the dollar.
  • The Yuan was slightly weaker at 6.6883 from 6.6820 yesterday.
  • The Pound Sterling fell to $1.2942 down from $1.2968 with more falls expected next week as the B. of E. adds further easing of interest rates!

Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
2016  07  8

2016  07  7

SHAU

SHAU

291.58

294.54

292.05

294.43

Dollar equivalent @ $1: 6.6883

$1: 6.6847

$1,355.97

$1,370.54

$1,358.16

$1,369.96

The fall in the Yuan is now on a gently continuous basis. It is being engineered in such a way that it has, to date, not alarmed the markets, which are consumed by the fall in sterling at the moment. For there to be a U.S. outcry on the Yuan’s weakening, as seen in the past, would lack credibility when we see the current turmoil in the markets.

LBMA price setting:  $1,356.10 down from Thursday 7th July’s $1,367.10.

The gold price in the euro was set at €1,225.25 down €7.21 from Thursday’s €1,232.45.

Ahead of the opening in New York the gold price stood at $1,347.80 and in the euro at €1,223.00.  

Silver Today –The silver price closed in New York at $19.67 yesterday down from $20.09 the day before.  Ahead of New York’s opening the price was trading at $19.50.

Price Drivers

Whenever you get that feeling that the way higher is free of obstacles, profit taking usually kicks in or a simple pause or consolidation comes in. That’s what’s happening now. While we had not seen any physical gold sales out of the gold ETFs we follow until now, the appearance of one dampens euphoria. Today, is an expression of that.

But when we look at the Technicals, the picture tells us that the price restraint will not last for long at all. Indeed, today may be seeing all that restraint disappear.

In the U.S. a much stronger than expected jobs report caused some wild fluctuations in the gold price with a knee jerk drive down to the $1,335 level before an almost equally rapid climb back to the $1,350s from whence the fall started.

On the fundamental side, we see Chinese demand starting to recover now. The news out of China that auto sales are up 19% confirms that Chinese middle class numbers are burgeoning, despite an overall slowdown economically. We focus on the middle classes because they drive Chinese demand for physical gold. With an estimated eventual 500 million Chinese middle classes on the way, the demand for gold will completely overwhelm available supplies.

In India markets are becoming euphoric, as the monsoon is now covering the entire country promising a strong rise in gold demand from that country too. With the U.S. demand for physical gold at levels last seen when gold was headed to its peak, the only restraint we see on the gold price is an Indian propensity to hold back when prices are rising strongly. They prefer to buy either on the fall or when a base is established.  But such caution is overwhelmed when it comes to your wife’s demands when a daughter’s wedding comes up [September to May].

In China gold investors buy when the disposable income is there, with the only restraint being how much that money can buy. This diminishes as prices rise, falling by the same percentage basis that gold prices rise.

Gold ETFs – In New York yesterday there was a sale of 4.158 tonnes from the SPDR gold ETF leaving its holdings at 978.286 tonnes. But there were no purchases or sales from or to the Gold Trust leaving its holdings at 213.19 tonnes.

What is a surprise, but shouldn’t be, is the sight of a sale of gold from the SPDR gold ETF. It’s not a small sale either. We are used to holders of the shares of this fund buying to hold for the long term, so the sight of the first sale of any significance for months, causes a surprise to all. But for there to be either a trader of a stale bull in this fund should be considered as a ‘normal’ market event.

Since January 4th this year, the holdings of these two gold ETFs have risen by 394.69 tonnes.

Silver –Silver prices are still pausing, but we expect for only a short while before moving higher, again.

Julian D.W. Phillips

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

Gold price drops as Chinese on holiday

New York closed on Thursday with the gold price at $1,114.30 down from $1,116.00. With China closed and the pre London opening seeing the gold price fall to $1,110 we find it difficult to accept such a fall when no market is open. When London opened the gold price slipped again to be set at $1,106.30 at the LBMA gold setting. The dollar Index was at 96.30 at the time and the dollar trading against the euro at $1.1165. In the euro the fixing was €990.86 down from €998.48.  Ahead of New York’s opening gold was trading at $1,107.3 and in the euro at €992.12.  The silver price closed at $14.56 up 2 cents over Thursday in New York. Ahead of New York’s opening, silver was trading at $14.43.

Today sees the announcement on the jobs report with 200,000 jobs expected. The caveat is that both in August and September these figures are subject to revision, subsequently. More importantly, the make-up of the jobs report is a clearer guidance to what lies ahead. We know that Manufacturing jobs [permanent] continue to fall as manufacturing continues to be drained to Asia. The big jump is expected in the services industry [temporary] with a smaller amount in the construction industry set to grow.  Wage increases are at 0.1% higher a sign that there is no pressure on employers to raise wages, which confirms that job security is not that solid. The Fed is looking for a consumer who sees his job being secure, wages rising and disposable income rising too. This has not happened yet. It may not happen for a long time to come still. The U.S. looks at these numbers to see if they point to a stronger dollar via an interest rate hike and then push the gold price down thereafter. With Janet Yellen confirming a rate rise before year’s end just how important is that proposed rise if the data does not support it?

The gold ETF SPDR in the U.S. saw a purchase of 1.787 tonnes but nothing into or out of the Gold Trust yesterday, but this was insufficient to halt its fall.  This leaves the holdings of the SPDR gold ETF at 689.204 tonnes and 160.65 tonnes in the Gold Trust. The trading range of the gold price has fallen below the bottom end of support which was on $1,100. We may see a strong move shortly, either way.

We are particularly waiting to see if the London and U.S. market reflects the closure of China until the 7th October. So far it has, as the gold price has dropped in the last two days. With U.S. investors being buyers of gold into the U.S. based ETFs this week, it is clear that the speculators and traders hold sway over prices.  

Silver is back is sagging as gold slips and faster than gold falls. Expect more of the same today. Julian D.W. Phillips for the Gold & Silver Forecasters  – www.goldforecaster.com and www.silverforecaster.com