Gold starts the week at over $1,280

Gold Today –New York closed at $1,278.20 Friday after closing at $1,270.10 Thursday. London opened at $1,281.00 today. 

Overall the dollar was weaker against global currencies, early today. Before London’s opening:

         The $: € was weaker at $1.1264 after Friday’s $1.1222: €1.

         The Dollar index was weaker at 96.77 after yesterday’s 97.20

         The Yen was stronger at 110.51 after Friday’s 111.51:$1. 

         The Yuan was stronger at 6.8036 after Friday’s 6.8153: $1. 

         The Pound Sterling was stronger at $1.2905 after yesterday’s $1.2875: £1.

Yuan Gold Fix
Trade Date     Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    6    5

     2017    5    2

     2017    5    1

SHAU

SHAU

SHAU

 

 

278.34

278.93

 

Trading at 281.60

277.96

278.63

 

$ equivalent 1oz at 0.995 fineness

@    $1: 6.8036

       $1: 6.8153

       $1: 6.8062     

 

   

 

$1,265.28

$1,269.67

 

Trading at $1,282.37

$1,263.55

$1,268.30

Please note that the Shanghai Fixes are for 1 gm of gold. From the Middle East 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.]

New York closed $4.17 lower on Friday than the Shanghai Gold Exchange was trading at today ahead of Monday’s opening. London opened at around $1 lower than Shanghai was trading earlier today. These are very small price differences evidencing arbitrage operations at very professional levels [likely banking operations]. We have been watching these markets, as you know, very carefully over the last year. Our conclusion is that we are watching global gold market developments that are much more significant than the 2005 ‘de-hedging’ operations by gold mining companies and the establishment of gold ETFs by the World Gold Council. These changes not only bring structural changes to the global gold market but demonstrate where gold is going in the future. As China has integrated gold into its financial system, the weight of physical gold trading is being brought to bear on global gold prices. As the  emphasis moves to physical dealing in gold, so its importance as an international reserve asset as well as an asset in support of global finances will increase in the months and years to come.

We are now watching a three sides of the global gold market that is just about in sync. Shanghai is the most influential on gold prices as it is the physical, global gold bullion hub now.

Silver Today –Silver closed at $17.52 Friday after $17.28 at New York’s close Thursday.

We expect to see silver outperform gold as it rises solidly. The Technical picture for silver will become dramatic if the gold price rises further.

LBMA price setting:  The LBMA morning gold price was set today at $1,280.70 from Friday’s $1,260.95.  The gold price in the euro was set at €1,137.04 after Friday’s €1,121.09.

Ahead of the opening of New York the gold price was trading at $1,280.80 and in the euro at €1,139.60. At the same time, the silver price was trading at $17.56. 

Price Drivers

The U.S. Friday’s jobs data disappointed markets, which were expecting much higher numbers. The figures imply that the momentum of jobs creation in the U.S. is waning. But the more important figure was the one giving the inflation picture which showed it was decreasing, a factor likely to influence the Fed’s decision to raise rates this month. We ask, “Will they?” Markets are telling us that they will, but the Fed will be considering the impact on financial markets if they go ahead and raise rates. They will be keen to ensure nothing interferes with the moderate growth the U.S. in experiencing right now. As a result the U.S. SPDR gold ETF and other gold ETFs saw an inflow of funds which pushes them into the market to buy physical gold. This return of demand may well continue to push prices higher.

Indian GST on Gold

At last, the Indian government has issued the level of General Services Tax to be levied on gold inside the country. It will be at 3% and was announced on Saturday by the Indian government [and is lower than industry expectations of around 5%] which will come into effect on July 1 and will replace a number of federal and state levies. The net effect is to raise taxes by around 0.5%, a figure that is going to make little difference to demand in the country. They are currently paying 1% excise duty and 1.5% VAT on gold.

But the net figure paid by Indians for gold is to be 13%, when one adds the Customs Duty of 10%. There is talk that the government will reduce Customs duty, but that talk has been around for well over a year already. We cannot see that happening soon.

As a result, India has a thriving gold smuggling industry that is now that little bit more profitable now. Two years ago the WGC guesstimated that that was 250 tonnes then. With its profitability even higher now, this well-established industry will undoubtedly be bringing in greater volumes. But that demand will not be registered in official figures, but analysts should add that sum to official numbers.

Gold ETFs – Friday, saw purchases of 3.551 tonnes of gold into the SPDR gold ETF (GLD). There were purchases of 1.37 tonnes of gold into the Gold Trust (IAU) since their internet page went down. It has now been corrected. Their holdings are now at 851.003 tonnes and we presume, at 204.34 tonnes respectively.

Since January 6th 2017 43.759 tonnes have been added to the SPDR gold ETF and the Gold Trust.

Julian D.W. Phillips  GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

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Gold falls further on Fed talk but fundamentals still remain good

Gold Today –New York closed at $1,239.50 yesterday after closing at $1,256.90 Wednesday. London opened at $1,234.00 today. 

Overall the dollar was slightly stronger against global currencies early today. Before London’s opening:

         The $: € was weaker at $1.0932 after yesterday’s $1.0912: €1.

         The Dollar index was slightly stronger at 99.11 after yesterday’s 99.08

         The Yen was weaker at 112.96 after yesterday’s 112.16:$1. 

         The Yuan was weaker at 6.8949 after yesterday’s 6.8921: $1. 

         The Pound Sterling was weaker at $1.2887 after yesterday’s $1.2923: £1.

Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    5    4

     2017    5    3

     2017    5    2

SHAU

SHAU

SHAU

/

280.58

281.20

/

280.04

280.79

$ equivalent 1oz @    $1: 6.8949

       $1: 6.8921

       $1: 6.8969

      

  /

$1,266.23

$1,268.15

/

$1,263.80

$1,266.30

Please note that the Shanghai Fixes are for 1 gm of gold. From the Middle East 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.]

The Shanghai Gold Exchange was trading at 277.10 towards the close today. This translates into $1,245.02. New York closed at a $5.52 discount to Shanghai’s close yesterday. London opened at a discount of $11.02 to Shanghai’s close today.

London is leading the way down at the moment, following Shanghai’s close and New York is beginning to show signs of buyers coming in. But we note that not until today did London outrun the others in taking the gold price down.

LBMA price setting:  The LBMA gold price was set today at $1,235.85 from yesterday’s $1,253.95.  

The gold price in the euro was set at €1,130.18 after yesterday’s €1,148.88.

Ahead of the opening of New York the gold price was trading at $1,234.35 and in the euro at €1,129.53. At the same time, the silver price was trading at $16.49. 

Silver Today –Silver closed at $16.47 yesterday after $16.83 at New York’s close Tuesday. The silver price’s fall is slowing another sign that the gold prices may well be looking to establish a bottom at current levels.

 Price Drivers

The Fed remains positive on U.S. growth despite the slowdown in the first quarter.  The indications are that the joblessness rate is now at maximum employment and the inflation rate getting close to the targeted 2%. This allows the Fed to continue discussions on shrinking the Fed’s Balance Sheet and leaving the door open for a June rate hike. The market saw this as negative for gold which has fallen heavily in the last day. We had forecast a strong move either way. It became clear that the Fed’s statement was the trigger for the fall, albeit that it has taken the New York, Shanghai and London sessions to make that happen.

The fundamentals remain good for gold, so we are watching to see if the fall in gold prices will hold for long?

France

It is looking more and more like a President Macron in France, but one wonders, without a political party behind him, how will he carry out his policies? Each policy will be assessed by the current political parties before they give him their backing. A victory by him will mean a continuation of the E.U. in its present form, for now.

Gold prices long-term.

Over the next decade, we will see a heavy fall in the volume of newly mined gold. Due to the decaying state of world politics and growing divisions in the monetary world, we are certain that global demand for gold will continue to rise. At some point the availability of scrap gold will suddenly shrink as the inevitability of a price surge becomes imminent. There will be no turning back of gold prices from then on.

Gold ETFs – Yesterday saw no sales or purchases from or into the SPDR gold ETF but the Gold Trust saw purchases of 0.41 of a tonne. Their holdings are now at 853.362 tonnes and at 204.23 tonnes respectively.

Julian D.W. Phillips 

 GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

Gold’s move east unstoppable

Gold Today –New York closed at $1,256.90 yesterday after closing at $1,257.20 Tuesday. London opened at $1,254.00 today. 

Overall the dollar was slightly weaker against global currencies early today. Before London’s opening:

         The $: € was weaker at $1.0912 after yesterday’s $1.0908: €1.

         The Dollar index was weaker at 99.08 after yesterday’s 99.13

         The Yen was barely changed at 112.16 after yesterday’s 112.14:$1. 

         The Yuan was stronger at 6.8921 after Friday’s 6.8969: $1. 

         The Pound Sterling was stronger at $1.2923 after Friday’s $1.2875: £1.

Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    5    3

     2017    4    2

     2017    4    28

SHAU

SHAU

SHAU

/

281.20

282.69

/

280.79

282.67

$ equivalent 1oz @    $1: 6.8921

       $1: 6.8969

       $1: 6.8944

      

  /

$1,268.15

$1,275.33

/

$1,266.30

$1,275.24

Please note that the Shanghai Fixes are for 1 gm of gold. From the Middle East 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.]

 The Shanghai Gold Exchange was trading at 280.70 towards the close today. This translates into $1,261.78. New York closed at a $4.88 discount to Shanghai’s close yesterday. London opened at a discount of $7.78 to Shanghai’s close today.

LBMA price setting:  The LBMA gold price was set today at $1,253.95 from yesterday’s $1,255.80.  

The gold price in the euro was set at €1,148.88 after yesterday’s €1,151.27.

Ahead of the opening of New York the gold price was trading at $1,254.20 and in the euro at €1,149.06. At the same time, the silver price was trading at $16.81. 

Silver Today –Silver closed at $16.83 yesterday after $16.89 at New York’s close Monday. Should the gold price return to an upward path, we see silver racing higher than gold’s rise.

 Price Drivers

The gold price remains in a vulnerable position, capable once more, of making a strong move either way. A glance at the fundamental factors shows a rise in the dollar gold price remains more likely than a fall. What’s more, we note that despite this vulnerability all we have seen by way of opportunist, speculative attacks have been dealers marking down prices in expectation of sales. The lack of bear raids from New York, tells its own tale about the state of the gold market, particularly the physical gold market. Should they continue to be absent, it would be a piece of solid evidence that the influence of COMEX over the gold price is waning.

The unstoppable shift of gold bullion to the east.

As we pointed out in the piece on Swiss gold exports demand from Asia remains very strong indeed. The refineries in Switzerland have been working 24 hours a day and 6 days a week to convert gold into metric measurement bars. This has gone on for many years now and is set to continue for the foreseeable future. It is quite remarkable that the developed gold world is quiet on the subject because it is only a matter of time before the western gold markets becomes secondary markets to Shanghai. That is why one should always deal in gold [without a re-refining process] in metric measurements

The Fed

We expect no actions from the Fed today, but as usual, any slight change in the language of the statement will affect financial markets across the globe. The recent weak data in the U.S. is expected to be temporary but we would look to the Fed’s statement for such assurances. If it is a concern to the Fed, we expect the gold price to benefit.

The Fed must be frustrated by the delay in the implementation of President Trump’s election promises, to which their policy should be riveted. They cannot afford to be out of step with government, which now seems unable to deliver on its promises, so remain directionless until the way forward for government is clarified.

Gold ETFs – Yesterday saw no sales or purchases from or into the SPDR gold ETF or the Gold Trust. Their holdings are now at 853.362 tonnes and at 203.82 tonnes respectively.

Julian D.W. Phillips 

 GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

Gold needs to break through 200 day MA to make move higher

 Gold Today –New York closed at $1,256.10 yesterday after closing at $1,256.30 Tuesday. London opened at $1,253.65 today. 

Overall the dollar was slightly stronger against global currencies early today. Before London’s opening:

         The $: € was stronger at $1.0664 after yesterday’s $1.0670: €1.

         The Dollar index was slightly stronger at 100.60 after yesterday’s 100.57

         The Yen was slightly weaker at 110.77 after yesterday’s 110.70:$1. 

         The Yuan was weaker at 6.8995 after yesterday’s 6.8892: $1. 

         The Pound Sterling was stronger at $1.2475 after yesterday’s $1.2428: £1.

Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    4      6

     2017    4      5

     2017    4      4    

SHAU

SHAU

SHAU

/

280.13

/

/

280.03

/

$ equivalent 1oz @    $1: 6.8995

       $1: 6.8892

       $1: 6.8836

      

  /

$1,264.24

/

/

$1,264.28

/

Please note that the Shanghai Fixes are for 1 gm of gold. From the Middle East 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.]

 The Shanghai Gold Exchange reopened today and was trading at 280.6 towards the close.

This translates into $1,264.97. New York is trading at a $3.87 discount to Shanghai and London opened at a $6.32 discount to Shanghai.

LBMA price setting:  The LBMA gold price was set today at $1,253.75 from yesterday’s $1,252.50.  

The gold price in the euro was set at €1,174.58 after yesterday’s €1,173.96.

Ahead of the opening of New York the gold price was trading at $1,252.45 and in the euro at €1,173.81. At the same time, the silver price was trading at $18.23. 

Silver Today –Silver closed at $18.30 yesterday after $18.31 at New York’s close Tuesday.

Price Drivers

In the last day, the gold price broke down to $1,244 before recovering back above $1,250. So the support still holds at $1,250, but it has to break through the 200-day moving average of around $1,260 before rushing higher. So we should be ready for a gold price move either way today.

The Fed Minutes stated that, by traditional valuations, the equity markets in the U.S. are too high. So we watch the S&P 500 to see what impact that will have.  They also indicated that they may reduce the Fed’s Balance Sheet later in the year. While two interest rate hikes in the future are already priced in the monetary tightening is not. It may well result in the yield curve rising across its spectrum.

In Europe, Mario Draghi cautiously implied that the fear of inflation has passed and while risks remain to the downside he was more confident that growth across the E.U. economy is becoming positive. To us there are so many continuing risks in Europe that one needs to continue to question the future of the E.U. economy. What we did find somewhat disturbing in what he said, was that the more positive shape of the economy was due to two factors, monetary policy and the oil price fall. Oil market commentators are pointing to rising oil prices [but not back to triple digit levels] If oil prices do rise significantly, [which does seem unlikely as it will unleash more supplies] the fragile E.U. economies will suffer alongside economic recoveries across the globe.

Top of today’s events is the meeting between President’s Xi of China and President Trump. If President Trump’s election promises are to be a guide the meeting should end with potential confrontations and massive tariffs on Chinese imports into the U.S.   A sobering fact on this issue is that 73% of shoes sold in the U.S. are made in China [as an example of what could happen]. Or will we see a dampening of election ardor?

With the Obamacare repeal failing, what will happen to potential tax cuts? If Trump fails to get these through, we are back to the last 8 years of gridlock in government. Unless Trump has a major victory we cannot expect to see the vibrant growth Trump promised. As it is the dollar is expected to decline gently from now on. If his failure on Obamacare is reinforced with more failure, the dollar’s fall will accelerate against gold.

Gold ETFs – Yesterday saw no purchases or sales into or from the SPDR gold ETF but sales of 0.04 from the Gold Trust.  Their respective holdings are now at 836.765 tonnes and 199.81 tonnes. 

Julian D.W. Phillips 

 GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

ROSS NORMAN : Rates Up – Gold Up – Why ???

To observers of financial markets it must seem odd that they often behave exactly the opposite to what is expected. Explaining it is also a strange thing too.

Essentially when the US Federal Reserve jawbones a potential move such as a rate hike (for the best part of a year), investor positioning is congruent with the expected outcome – that is to say dollar / equities up an by extension, gold down.

But what happens when they are too successful in leading the markets expectations and the market positioning is too extreme for the expected move. Well you have a heap of investors who are short gold and long the dollar / equities who don’t get the win they expected… that is to say the move is over-priced into the news. As such, those investors – be they speculators in the futures markets or physical buyers who have forestalled their purchases for a hoped for price correction … are vulnerable.

In this environment a little counter-intuitive buying of gold and selling dollar / equities is usually sufficient to frighten them into covering their position. In short, markets end up moving exactly the opposite way to how classic economics would tell us. And the move feeds on itself because of the extreme positioning.

Evidence to support this view is gold’s move over the last few rates increases – the 25 bps increase in December 2015 saw a subsequent 18% rise in gold over the following 3 months. Meanwhile the December 2016 rate rise saw an 8% increase over the next 3 months. Yesterdays rate rise has seen a 2.4% rise in gold so far … and appears to be petering out. What this indicates is that the wonderful ruse by institutions who exploit predictable investor behaviour seems to be running its course.

So where do we go from here – well having been burned by behaving logically, presumably those investors who keep finding themselves “long and wrong” in dollar/equities and “caught short” in gold will be more perspicacious – a posh way of saying more wise and cynical. Ultimately we could just end up not listening at all.

Ross Norman – www.info.sharpspixley.com 

Three articles on gold, the dollar and the Fed effect on them

While I may not have been publishing much on lawrieongold.com in the past few weeks or so,  I haven’t been being non-productive but have been publishing my own articles elsewhere while using this site for what I deem to be some pertinent independent comment.  Readers may thus like to have their attention drawn to a series of three articles, all published on www.info.sharpspixley.com looking at the effects on the gold price and the U.S. dollar of various statements by US Fed Board members and Heads of Regional Feds, which in concert suggested that rather than wait until June to implement the next Fed rate rise, which had been the consensus, that it was now likely to occur at the March meeting of the FOMC, which is now due in 10 days time.  The effect of these statements has been to drive the dollar index higher and the gold, and other precious metals prices, downwards.

In chronological order the three articles are as follows – click on the article titles to read in full:

1.       Gold price knocked on renewed talk of March Fed rate rise

President Trump’s address to Congress, and perhaps even more so statements by US Fed officials, saw the gold price drop more than $10

 

2.       Gold and silver holed by the Fed – again

The odds of the US Fed implementing a rate increase as early as the March FOMC meeting in 2 weeks’ time have increased to over 80% with gold and silver prices suffering accordingly.

 

3.       Gold, the dollar and the Fed. Fortunes made and lost?

The latest series of hawkish forecasts on a probable March interest rate rise could have given anyone with foreknowledge the opportunity to make enormous monetary gains.

 

Readers may also like to view articles I’ve been publishing on Seeking Alpha.  The latest of these is: Gold And Silver Stock Picks: How Are We Doing So Far. Which looks at the performance of some stock picks I made on December 30th – but be advised the article was written immediately before the various Fed grandee statements knocked the gold price back sharply.  However I still stand by my recommendations.

Precious metals outlook 2017

By Clint Siegner*

Precious metals had a wild ride in 2016, launching higher in the first half of the year and then falling much of the way back to earth in the second half. Our outlook for 2017 hinges on some of the drivers that figured prominently in last year’s trading. There are also a couple of new wrinkles.

Europe

We’ll start with some fundamentals that metals investors have become well acquainted with in recent years. The troubles plaguing Europe seem to be forgotten, but they certainly aren’t gone. The question is whether or not officials in Europe will be able to keep the wheels on in 2017.

Several major European banks remain in jeopardy, plagued by bad debts, too much leverage, and mounting legal expenses. Germany’s Deutsche Bank (DB) was often in the headlines last year as its share prices made all-time lows. Deutsche Bank paid out $60 million to settle charges of manipulating the gold market.

Tattered EU Flag

In addition, regulators in the U.S. had proposed a crushing $14 billion fine related to the bank’s marketing of dodgy mortgage backed securities prior to the 2008 financial crisis.

Since then share prices have recovered significantly. The bank agreed last month to a settlement of just over $7 billion, roughly half the amount originally proposed but still a hefty penalty. The bank’s loan book still looks ugly and its exposure to risky derivatives remains a wild card.

The recent failure of Italy’s third largest bank – Monte dei Paschi – may put the spotlight back on the European banking sector. Particularly if other institutions, such as Deutsche Bank, have been aggressively selling credit default swaps they will now have to pay out on.

Investors grappled with the Brexit referendum in 2016. This year they will find out if Britain’s vote to leave the EU will actually get implemented. Negotiations around the departure are expected to commence in May.

Italians are going to select a new government shortly and there are elections coming up in Germany, France, and the Netherlands in the months ahead. Anti-European Union forces are making real headway in the polls.

This year looks pivotal for the EU, the euro as its currency, and its banks. Turmoil there will boost safe haven buying in precious metals and the U.S. dollar. Alternatively, should the establishment and the banks weather the storm, metal prices could suffer, at least in terms of euros. Right now, turmoil in Europe looks like the better bet.

The Fed

Once again markets enter a new year in thrall to Janet Yellen and the rest of the Federal Open Market Committee. Like last year, we just had one rate hike. Officials are telegraphing three to four additional hikes in the coming 12 months.

Last time around the stock market suffered stimulus withdrawals. Fed officials threw in the towel and reversed course almost immediately. We can expect officials are watching equity prices carefully now. If the S&P 500 keeps powering ahead, they’ll have the cover they need to deliver rate increases.

United States Federal Reserve System

If, on the other hand, we find out that markets are still addicted to low rates and officials can’t tolerate the pain of a withdrawal it will be bad news for the dollar and good news for metals.

A Donald Trump Presidency

The election of Donald Trump is what makes this year different. Many people are optimistic about the prospects for a major infrastructure program, tax cuts, and less regulation. Investors are ready to take on risk. Since the election, they have been mostly getting out of safe haven assets such as bonds and gold, while paying top dollar for stocks.

The rub is that Trump has yet to assume office. The expectations are high and, frankly, something has to give. Trump might deliver a big infrastructure program and some tax relief. However, that would spell trouble for the current dollar rally as people anticipate ballooning deficits and borrowing.

Or, Trump may find his proposed measures are easier said than done. Republicans control Congress, but there is no certainty they will accept big spending increases and even higher deficits. If optimism bumps up against a bleaker political reality, it’ll be bad news for investors playing the Trump rally.

Conclusion

2016 closed with investors positioning for smooth sailing and economic growth. They may get it but a number of things will have to go right. If they don’t, jettisoning safe haven assets to buy stocks at record high valuations won’t look like a very good idea.

Gold and silver thumped by Fed statement

Gold Today –New York closed at $1,142.60 yesterday after closing at $1,158.6 on the 13th December. London opened again at $1,136.80 today.

 Overall the dollar is much stronger against global currencies today.

         The $: € was stronger at $1.0478: €1 from $1.0649: €1 yesterday.

         The Dollar index was stronger at 102.54 from 100.87 yesterday. 

         The Yen was weaker at 117.81: $1 from yesterday’s 114.95 against the dollar. 

         The Yuan was much weaker at 6.9352: $1 from 6.9025: $1 yesterday. 

         The Pound Sterling was weaker at $1.2520: £1 from yesterday’s $1.2656: £1.

 Yuan Gold Fix

Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2016  12    15

      2016  12    14

      2016  12    13

SHAU

SHAU

SHAU

263.55

264.98

265.04

263.45

264.99

264.93

$ equivalent 1oz @  $1: 6.9352

      $1: 6.9025

$1: 6.9009

  $1,181.99

$1,194.58

$1,189.20

$1,181.54

$1,194.08

$1,194.08

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.]

 Shanghai prices held $33.94 higher levels than prices in New York. London opened at a higher discount to Shanghai of $39.74.  In the last day London and New York gold prices have dropped in the dollar around 11% whereas Shanghai gold prices in the Yuan have dropped only 0.5%. This is an important point, we feel pointing to volatility in London and New York continuing then doing so both ways. i.e. Shanghai is implying that gold prices are falling too far too fast, despite the rising dollar..

This confirms that the moves in gold prices in the different markets are a reflection of currency movements not sales and purchases of gold. The arbitrage opportunities are huge for those selling gold to sell into China, not London or New York.

LBMA price setting:  The LBMA gold price setting was at $1,132.45 this morning against yesterday’s $1,160.95. 

The gold price in the euro was set higher at €1,085.45 after yesterday’s €1,090.45.

Ahead of the opening of New York the gold price was trading at $1,129.50 and in the euro at €1,083.66.  At the same time, the silver price was trading at $16.11.

Silver Today –Silver closed at $16.80 at New York’s close yesterday from $16.91 on the 13th December. We see it falling further than gold now, but also rallying, thereafter, faster than gold.  

Price Drivers

The gold price in the Yuan and the euro only fell slightly. It was a strong dollar rising against gold that brought the price down in dollar terms. We do not expect to see the dollar continue to get stronger over the next few weeks, as that is against the U.S. interests.

We see the fall in the gold price as coming to an end ahead of a rally soon. Shanghai and the silver price points to this. The sale of 6+ tonnes from the SPDR was a large amount but not one likely to cause such a fall. Once the Fed’s announcement is fully digested, then we see gold rallying.

The Fed’s announcement rocked all markets including gold and silver not because of the hike of 0.25% but for the three year forecast pointing to three hikes in each of the next three years. No more the waiting for data to guide them? This was a vote of confidence in the U.S. economy, where they clearly see the economy reaching a self-sustaining momentum, if not there already. Inflation is rising through their 2% target and pointing higher. Trumpanomics was certainly factored in by the FOMC which adds tremendous fiscal stimulus to the formula. If they stick to these rate forecasts [and they don’t have to] and they are too optimistic such rate hikes will hurt the economy and it will turn down fast. But will ‘real’ interest rates go positive?

Take a robust U.S. economy against a weak EU & Japan still in their QE phase and the prospects for exchange rates outside of the U.S. down strongly, something they have wanted for years. The race to the bottom in currencies will produce a very volatile currency world for several years. Right now the “Carry Trade” are racing to unwind their positions, strengthening the dollar and taking it back into its ‘bull’ market. Unless the Treasury takes action to restrain the dollar we expect several currency crises in the next three years. That’s the rosy picture for the future. Of course the Fed expressed intentions, not certain realities, so this picture could easily turn bad if the reality is very different.

Outside of the U.S., difficult times lie ahead as the U.S. will become solely interested in what benefits the U.S., likely at the cost of its current trading partners. We do see a trade war but against a robust ‘enemy’, China. China is on course to eliminate poverty by 2020 and by then should also have a robust, self-sustaining economy too.  With their interests diverging we see more division in the world. This will directly impact the currency world to the detriment of the dollar as a reserve currency.

As to gold and silver in this environment we say this;

  • Currency turmoil will benefit gold and silver prices as it brings instability and uncertainty.
  • Trumpanomics will lessen the value of the dollar and all other currencies, [as they try to remain lower than the dollar], as rising debt and inflation benefits gold and silver prices.
  • A multi-currency monetary system is inevitable, which will benefit gold and silver.

Gold ETFs – Yesterday, there were sales of 6.818 tonnes from the SPDR gold ETF and a sale 0f 0.6 of a tonne from the Gold Trust holdings, leaving their respective holdings at 849.441 tonnes and 196.35 tonnes. Under these circumstances we would expect more sales today as the Fed’s announcement is digested.

Since January 4th this year, 245.322 tonnes of gold has been added to the SPDR gold ETF and to the Gold Trust. 

Julian D.W. Phillips – GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

Gold back on the Fed Grindstone

Edited version of another of my articles published on the Sharps Pixley website.  To read original click here

Gold followers will hardly be unaware that every time a Fed Open Market Committee Meeting draws near the gold price moves, often  quite sharply, on the will she, won’t she prospect of Janet Yellen announcing that at long last the Fed will start to raise interest rates again.  Now we are coming up to the December FOMC meeting – a full year after the last Fed rate rise.  Well the meeting is due to take place on December 13thand 14th and perhaps there is actually a realistic likelihood that indeed on this occasion it will be a case of ‘she will’.

So the gold price has been moving accordingly, but perhaps not quite in such a volatile manner as on previous occasions when the likelihood of a Fed rate raising decision was rather more uncertain.  During European and North American trading the futures markets have managed to control it in the $1,170s and $1,180s for the most part, with a so far brief foray into the $1.160s but any moves to the higher levels seem to be swiftly capped and brought back down again.  There does seem to have been something of a plethora of adverse gold price comment being released at present and when this has happened in the past it has sometimes been associated with a significant price takedown.  It remains to be seen whether this is a portent of yet another instance of such.

The anomaly here appears to be the Shanghai Gold Exchange Benchmark Pricing which seems to be coming in at levels above $1,200 two or three times this week so far, although these higher levels don’t seem to appear in the Kitco gold price charts.  We do know that Chinese gold prices are running higher at the moment and carrying the highest price premiums over London and New York prices seen for some time.  Some put this down to reports that the Chinese Government is already restricting, or is planning to restrict, the number of gold import licences.  This has been running in parallel to rumours that India, the other major global importer of gold, is planning to ban gold imports altogether, although one suspects that if this were to happen the amount of gold smuggled into the country would soar.  The caution here though is that when Chinese and Indian demand was just about at its strongest back in 2012, the gold price tanked due to heavy withdrawals out of the big gold ETFs and we have again been seeing some major outflows from GLD in particular.

The other reason for the Chinese high premiums – reportedly approaching $30 an ounce on some days – is that traditionally this is the time of year for Chinese fabricators and gold retail outlets to stock up ahead of the Lunar New Year festivities which can create temporary gold shortages, particularly in a year when gold imports have been running at a lower level.  In 2017 the Chinese New Year falls on January 28th, followed by a full week of holidays (The Spring Festival Golden Week) and gold has always played a hugely significant part in gift giving over the period.

It should be noted, though, in respect of something of an anti-gold media campaign that reports are surfacing that a number of major bank analysts are now seeing a period of substantial gold price weakness ahead coupled with the Fed rate rise decision. and more  Whether these analysts should be given any credence or not given most analysts were predicting that a Donald Trump victory in the U.S. Presidential election would see gold surge and the stock market crash, is a moot point.

Perhaps before drawing any conclusions one should wait for the results of this weekend’s Italian constitutional referendum.  A defeat for the Renzi  Government position,  which the opinion polls are suggesting, given the set anti-euro positions of the opposition could put the EU in turmoil again, which could give the gold price a welcome boost.  But then, after the Brexit vote and the U.S. Presidential election result, who believes the opinion polls any more?

In the context of a Fed rate increase those with only a short memory may also recall that after the last rate increase a year ago, gold fell back just a little, and briefly, in a knee-jerk reaction and then set off on a six month bull run!

The past year has seen a number of major destabilising events occurring (the Brexit vote, Trump victory and Indian banknote cancellation fiasco all within the past few months) and with the Italian referendum perhaps adding another.  In the long term such uncertainties have to be gold positive, but  there could well be some negatives in the interim and perhaps the first will be the actuality of a Fed rate increase.  Prepare for a bumpy ride.Gold

Central bankers hate to be seen to be wrong

With so much seeming to ride on central bank interest policies in terms of equities in general, and precious metals in particular, perhaps one should look at the motivations behind the timings of likely interest rate hikes.

If we start with the U.S. Fed – nine months ago its Federal Open Market Committee (FOMC), which calls the tune on interest rates, was predicting that the U.S. economy was recovering sufficiently to allow three, or perhaps four, small rate hikes in 2016.  Presumably the economy has not so far recovered sufficiently to do so and thus not a rate hike to be seen as yet, which is why there has been so much attention being paid to a possible September rate increase.  Perhaps this could still happen despite some poor economic data, if only to save FOMC face.  We get successive statements suggesting the U.S. economy is coming right, only for the next set of government data showing that it patently is not doing so, and the rate increase can gets kicked down the road again.

The latest data, showing disappointing retail sales in August, following on from an ultra cautious statement from Fed Governor Lael Brainard, seems to have left those thinking that there could yet be a September rate increase announcement, in the distinct minority.  But there are still lingering doubts that the FOMC may talk itself into a rise this month, hence some of the weakness seen in the gold price and equities.

Everyone rules out a November rate hike as that would come so close only a couple of days ahead of the Presidential election date and now apparently some 70% of analysts believe that the FOMC will bite the bullet and implement a small increase in December – probably whether the data would seem to justify this or not.  While the Fed’s forecasting credibility is perhaps near zero, to do this might be a tiny face-saver, although there are still analysts and commentators out there who believe the Fed may hold off any tightening for a few months beyond that date.

Here in the UK we have the opposite scenario post the Brexit vote.  The establishment spent so much time telling everyone what a disaster a vote to leave the EU would be economically that not surprisingly, in the immediate aftermath of the referendum, economic nervousness prevailed.  Bank of England (BoE) Governor, Mark Carney, was at the forefront of the dire warning brigade, as was the Chancellor of the Exchequer (Finance Minister), George Osborne who had suggested there would have to be an immediate increased austerity budget should Britain vote to leave the EU.  George Osborne is no longer Chancellor and his successor, Philip Hammond, does not seem to be considering drastic changes ahead.

To almost everyone’s surprise, the UK economy is yet to show much, if anything, in the way of a downturn after an initial stutter which we would put down to the ‘Project Fear’ Remain campaign.  Even so the BoE lowered interest rates ‘just in case’ as an economic stimulus in August and although it has kept them steady this month as the data so far has notGovernor  supported the necessity of a further cut, Carney is still forecasting the likelihood of an additional drop before the year-end – presumably taking the bank’s base rate down to zero percent – or very close, although his most recent statements have perhaps been slightly less negative.

Consider the data.  The stock market is up post Brexit, employment has risen, property prices appear to be on the rise again, we are still in a GDP growth phase, the latest Services PMI for August (i.e post Brexit) has shown the biggest month on month rise in its history;  the August manufacturing PMI also grew at the fastest rate in its 25 year history to 53.3 when the market had been expecting a contraction;  inflation has not yet taken off, despite the fall in the value of the pound sterling against the euro and the US dollar.  Indeed the pound seems to be just about the only sufferer so far from the Brexit vote, although this is a two-edged sword in that it makes UK exports more competitive, and boosts tourist spending as foreign currencies go further making the UK an even more attractive destination.

Now Carney, the BoE  and the other Brexit naysayers will warn that this is a phony temporary outcome.  Inflation is almost certainly going to increase as lower sterling means higher costs of imports and if that starts filtering through to consumer spending we could well see difficult times ahead.  It is early days yet, and the UK is still in the EU so the real exit fallout is perhaps still two years or more away.  But so far the figures have confounded virtually all the ‘expert’ predictions and perhaps they will continue to do so when some of the potential positives of Brexit are at last taken into account.

However, this doesn’t stop the Brexit doom and gloom merchants from still trying to talk things down in order to justify their dire predictions – and Carney and the BoE are among these and thus may yet decide to cut rates again whether the data really justifies this or not.  Conversely the U.S. Fed may well raise rates to pursue the so-called legitimacy of its own forecasts.  That’s what happens in global economics and politics.  The experts and the establishment hate to be seen to be wrong and will often follow their pre-conceived paths regardless with no thought for the general public and the investment community if it may affect them adversely in the process.

What is doubly worrying is that this same analysis may well apply throughout the global political arena – even down to going to war!  Once national leaders are set on a particular path they tend to continue regardless, even though intelligence data may change and not ultimately support their decisions.  One might argue that the Iraq wars and the interventions in Afghanistan, Libya and Syria have indeed followed this kind of route with no planning or perception of the potential consequences, not only for the combatants, but probably even more importantly for the domestic populations of those nations. They just create a power vacuum allowing extremist organisations to take control, if not of the whole country, but large swathes of it.

NATO could find itself embroiled in something similar in the Ukraine when it could talk itself into lining up against Russia – altogether a different, and far more alarming, confrontation for all concerned.  But it’s too easy for what starts as combative rhetoric to lead to an ultimate nightmare scenario with neither side willing to back down for fear of losing face.

But that’s something of a digression, albeit an alarming one.  Both the U.S. Fed and the BoE, and perhaps the European Central Bank too, could be talking themselves into economic policies which are to the ultimate detriment of their own domestic communities and will likely also adversely impact the world’s emerging economies.  Arguably the Bank of Japan has already accomplished this having implemented policies which have driven this key economic and industrial powerhouse into years of average zero growth.

But until we hear the results of the FOMC deliberations before the end of this week, precious metals and equities may remain volatile – even with the week-long moratorium on Fedspeak ahead of the meeting so there won’t be FOMC participants muddying the waters with their conflicting statements.  If, as most expect, there’s no decision on rates this time, the markets may breathe a collective sigh of relief up until the weeks ahead of the December FOMC meeting when we’ll see this all play out again.

The above article is an updated and edited version of one which first appeared on the Sharps Pixley website last week

Disappointing U.S. data propelling gold towards $1,350

We have recently speculated as to how the gold price might perform now U.S. execs are back at their desks after holidaying in the summer sunshine.  Precious metals investors will no doubt recall the time in 2011 when the end of the summer holidays precipitated the beginnings of a prolonged period of precious metals price weakness and will have been worried that this year might see something of the same effect given gold and silver’s strong run over the first half of the year, but this year’s price performance has been very different from that of 2011.  Back then the gold price had soared throughout the normally weak July and August months – unsustainably so as it proved.  This year the gold price has been pretty flat to weak in July and August following a Brexit boost in late June.  Many analysts have seen this as consolidation, perhaps ahead of an upturn in the final four months of the year.  Early signs for this look good with the gold price today heading into the mid-$1,340s.  Indeed it has hit $1,350 on the spot market on a couple of occasions before slipping back.

Thus, on the first days of trading after the Labor Day holiday, initial portents for precious metals price performance will have been encouraging for investors, helped by weaker than expected PMI Services data and by a weaker dollar.  Interestingly, like Friday’s nonfarm payroll figures, the latest Services PMI is not actually weak per se – remaining above the all-important 50 level – but was sharply weaker than analysts’ expectations.  The U.S. economy may thus well be growing, but perhaps at a far slower rate than entities like the U.S. Fed would like us to believe.

The net result of the weaker than anticipated US data is for analysts and investors to assume the Fed is unlikely to restart interest rate tightening at the September FOMC meeting in two weeks’ time, for fear of nipping any tentative economic upturn in the bud.  If this assumption is correct – and it may be dangerous to assume that it is, given Fed credibility could be at stake in that it had foreshadowed up to four interest rate hikes in 2016 back in December last – then that effectively rules out any interest rate hike announcement until the December FOMC meeting which takes place December 13-14.  And if US data follows its current weaker than anticipated course then even a December rate hike may be in doubt.  (November is effectively ruled out as a rate increase announcement then would only come about a week before the Presidential Election date scheduled for November 8th.)

Of course the Presidential Election itself could provide yet another huge degree of uncertainty in U.S. markets.  According to the latest CNN poll, Donald Trump and Hillary Clinton are running neck and neck – and the Donald is actually in the lead taking into account those who are most likely to turn out and vote, although the majority still anticipates a Clinton victory.  Voter turnout could be key with neither candidate being popular with the electorate and, if anything, the latest polls show that Clinton is even less popular, or trusted, among registered Democrats than Trump is among Republicans.  As with Brexit, voter turnout may be key and with the two contenders being so unpopular even among their own party supporters, this could be hugely unpredictable.

With the election only two months away we will be seeing probably the most vitriolic, and personally antagonistic, campaign ever which will do nothing for any positive global perceptions on the US political system and could rebound on the economy and markets dependent on who is seen as gaining the upper hand. As someone who awoke on June 24th to hear that UK voters had gone for Brexit, contrary to nearly all the polls, one cannot but help wondering if U.S. voters will be similarly shocked at the Presidential outcome on November 8th.  Whoever is elected, economic uncertainty will undoubtedly come to the fore and that could give a big boost to gold in the final two months of the year – and could see the dollar and the general equities markets take a substantial knock further hamstringing any Fed move to raise interest rates.

As we advised UK investors to invest in gold ahead of the Brexit vote – and those who did were rewarded well with the double whammy of a dive in the value of the pound against the dollar coupled with a rise in the gold price – US investors might also be well advised to buy gold ahead of the Presidential election as financial insurance against an unlikely result causing the dollar to fall and gold to rise (which many will see as effectively the same thing!)

For the  moment, gold still seems to be holding up in the $1,340s and silver at or around just below $20.  After rising to above 71, the Gold:Silver ratio (GSR) has come back down to a little below 68 showing that, as usual silver has been performing better than gold when the latter is looking even just a little stronger.  Should gold breach $1,350, expect the GSR to come down even more and silver could easily hit the mid $20s or higher – still an awful long way off where it rose to up until the big take-down in 2011, but in terms of performance this year has already done well for those invested in it at the beginning of 2016.

This is an updated and edited version of one posted by me on the Sharps Pixley website earlier in the week 

Fed member statements move gold price up or down. Should this be allowed?

First one US Fed leader says one thing regarding the possibility of a second interest rate hike this year and then another comes up with a different take on the U.S.’s overall economic position and gold and the dollar move up or down depending on what position is being taken.  We have commented before that why the gold price moves to the extent it does on the potential timing of what is likely to be a minimal interest rate increase of perhaps 25 basis points is somewhat of a mystery.  (See: Why does gold react so sharply to poss. Fed interest rate rise schedule?)  Real inflation is growing at a higher rate than official figures suggest and even if there is a small rate increase, the U.S. will effectively remain in negative rate territory, which is generally positive for gold, but this seems to be being totally disregarded.

Regarding a possible Fed rate increase, possible dates, if the Fed will raise them this year, are September, November and December.  We can probably rule out November as the Fed meeting is scheduled only a week ahead of the US Presidential election and the Fed wouldn’t want to be seen as doing anything which might be seen as impacting the result for whatever reason.  That leaves next month – probably too early, given the tone of the last FOMC minutes – and a more likely date of December, a full year after the last rate increase assuming economic indicators don’t turn down, which they well could.  But from a Fed credibility point of view one suspects that there will be added pressure to go for at least a December rate rise and we would rate that as the most likely date even though a number of top rated analysts do not believe the Fed will return to making small rate rises at all until next year – if then.

So what if the Fed does raise rates by perhaps another 25 basis points in December.  The biggest worry for the FOMC is perhaps that this will adversely impact general stock market growth.    There are many out there predicting a stock market crash as stocks are seen as overvalued and the worry is that it may only take a tiny adverse change in interest rates to trigger the start of a major downturn.

One doubts that the possible effects on gold will even be considered but it is worth remembering that after a very small adverse reaction given the rate rise was well forecast last December, within 3 weeks gold started on its upwards surge.  So much for adverse effects of a Fed rate increase on the gold price.

Personally one feels it would make sense to forbid Fed members from making statements suggesting whether or not rates will be raised sooner or later between FOMC meetings.  There’s always a knee jerk reaction in the U.S. markets following such statements with stocks, and gold in particular, moving up or down, sometimes quite sharply, on such statements which makes them potentially prone to abuse.  The Fed members who make these statements must be aware of exactly what their prognostications will do with respect to market movements.  Now maybe it’s Fed policy to promote such uncertainties, but if so it is a dangerous game to play, and an unfair one for the investment community

Bullion bargain hunters could miss the boat

By Clint Siegner, Director, Money Metals Exchange*

Investors need to feel like they are getting a bargain – that prices can head much higher still. Many aren’t “feeling” it in the bullion markets. Now that silver has made a run back to $20/oz and gold is once again at $1,350/oz, the metals don’t seem cheap. Some investors are even grabbing the opportunity to sell.

The U.S. Mint finally caught up with orders for the silver American Eagle. Dealers are no longer faced with rationing by the dysfunctional government mint. And premiums for bellwether 90% silver U.S. coin bagsare falling. For the first time in years, there is more than enough being sold back into dealer stocks.

90% Silver Quarters and Dimes90% silver dimes and quarters are available at the lowest premiums in years.

That makes now a good time to take a look at the landscape and decide whether metals are topping out here – or if today’s prices still represent a bargain.

We can start with economic growth and what that implies for Federal Reserve policy. Last week’s report on second quarter GDP missed expectations by a mile – coming in at just 1.2%, and the anemic growth numbers in the prior two quarters were revised downward. The Wall Street Journal characterized the “recovery” in the U.S. as the “weakest of the post-World War II era.”

The author also points out that, at 7 years, this “recovery” is getting long in the tooth.

This reality doesn’t jibe with comments from the Fed. It’s an awkward time for our central bankers. They promoted wildly unpopular bank bailouts and programs to buy Wall Street’s most toxic and fraudulent loans. They printed trillions to monetize Treasury debt. They pushed interest rates down to zero, which has decimated seniors and others who depend on interest income.

They told us these measures were absolutely essential to returning the U.S. economy to solid footing. But this pathetic “recovery” is all they have to show for it.

It is cannot be totally ruled out that Fed officials could be right, that, after 7 years of tepid growth, the U.S. economy will finally lift off. That the Fed will finally normalize interest rates and no more stimulus will be necessary. There are market observers out there who still believe this to be possible.

We don’t buy it. Even if, by some miracle, our stimulus-addicted economy can find a way to grow during withdrawals of stimulus, Congress can no longer live without the Fed’s magic money machine.

Highest Probability Bet Is Lower Interest Rates, Higher Gold Prices

The Congressional Budget Office is projecting the federal government will rack up another $9.4 trillion in debt in 10 years. That may be wishful thinking. They have a history of underestimating how much programs will cost. Normalizing interest rates 3-4% higher than they are currently will lead to crushing public and private debt service payments and send the economy off a cliff.

And no, electing Donald Trump as president won’t solve this problem either.

We suggest it would be wiser to bet on negative interest rates, or helicopter money, or both. That means the dollar has much further to fall and gold and silver prices are just getting started on their journey north.

Investors Waiting Too Long May Get Left Behind

Bullion investors should also consider that, despite the rise in prices, the value proposition for gold and silver is quite compelling. Speculative interest in gold and silver futures is near all-time highs. Same for ownership in metals ETFs. Heavy speculative inflows in recent weeks may be cause for concern about precious metals markets overheating near-term. But by comparison, the bond and stock markets have been overheating for years.

The “smart” money is dumping stocks and looking for alternative assets given that equity prices are so high with so little in the way of profits to support them. Large investors aren’t buying Janet Yellen’s assurances about recovery, and they are increasingly uncomfortable with price to earnings valuations at the current levels.

Want to know something else institutional investors don’t love? A 1.5% yield on a 10-year Treasury note. They may be buying bonds – perhaps because they anticipate yields are going even lower or even negative – but the lower yields go, the more attractive metals become. No one has to sacrifice much interest to hold metals instead of cash or bonds.

Many hedge fund managers, including some who previously hated gold, are looking in consternation at inflated stock prices and epic low yields in the bond market and saying, why not? At least gold and silver are among the best performing assets of the year, and prices are still nowhere near all-time highs like bonds and equities.

There is certainly nothing wrong with bargain hunting. Bullion investors just need to remember that when prices are in an uptrend, finding a bargain means not waiting too long to buy.

*Clint Siegner is a Director at Money Metals Exchange, the national precious metals company named 2015 “Dealer of the Year” in the United States by an independent global ratings group. A graduate of Linfield College in Oregon, Siegner puts his experience in business management along with his passion for personal liberty, limited government, and honest money into the development of Money Metals’ brand and reach. This includes writing extensively on the bullion markets and their intersection with policy and world affairs.  This article first appeared on the www.moneymetals.com website

Greenspan, Gold, and the Banality of Evil

A controversial article looking at former U.S. Fed Chairman Alan Greenspan’s role in the easy money systems which have pervaded the U.S. and the world economies – and his recent disavowals of these systems in retrospect.  While the article is primarily directly relevant to the U.S. economy, it has parallels within any nation which has implemented similar monetary easing.  The views expressed are those of the author and not necessarily those of the owner of this website.

By Stefan Gleason*

Under certain circumstances, seemingly decent human beings are capable of horrific things.

So it is with Former Federal Reserve Chairman Alan Greenspan, who parlayed his sound money bona fides into the top post at America’s private banking cartel and current issuer of our un-backed currency. In betrayal of his own stated free-market principles, Greenspan spent his tenure at the Fed pumping up financial markets with easy money and enabling runaway government spending commitments.

Today, however, the “maestro” of central banking is playing a very different tune. He’s warning against an inevitable crisis resulting from the very policies he helped implement.

Perhaps it’s a late-life crisis of conscience. Perhaps he feels guilty. Perhaps at age 90, he just feels free to speak his mind in a way that most current and former Fed officials don’t. In any event, Alan Greenspan is very concerned about the legacy he will leave and now seems genuinely worried about the country’s financial future.

Greenspan: “We Are in the Very Early Days of a Crisis Which Has Got a Way to Go”

Following the Brexit shock and the market volatility that followed in its aftermath, Greenspan scolded British officials for the “mistake” of allowing the vote to leave the European Union to take place. He predicted more dominos would fall. In an interview with Bloomberg last week he said, “We are in very early days of a crisis which has got a way to go.”

It’s not surprising to hear Greenspan echo other pro-globalist voices in bemoaning the potential disintegration of the European Union. Central bankers, commercial bankers, governments, and international corporations all have vested interests in pushing for what they call “integration.”

Alan Greenspan on Bloomberg

Outgoing United Kingdom Independence Party (UKIP) leader Nigel Farage declared the successful Brexit referendum “a victory for ordinary people” against “multinationals,” “big merchant banks,” and “big politics.”

As global stock markets protested, the gold market surged to new 2016 highs post-Brexit.

The success of Brexit, which defied the predictions of pollsters, may bode well for Donald Trump. His unconventional campaign for the presidency hits on similar anti-globalist, anti-establishment themes.

Meanwhile in Congress, renegade Republican Rep. Thomas Massie is pushing what he calls an “Amexit” from the United Nations. Massie’s American Sovereignty Restoration Act (HR 1205) would allow the U.S. to leave the United Nations and cease sending $8 billion per year in “contributions” to the world body.

Anti-establishment politics irks elites in central banking and elsewhere who institutionally prefer the status quo. But what really worries former Fed chair Alan Greenspan isn’t the upcoming election or any bill in Congress. It’s the $19+ trillion national debt and the trillions more in future spending commitments that are already baked into the cake.

Greenspan: Entitlements Time Bomb “Is What the Election Should Be All About”

The problem, as Greenspan sees it, is the structure of Social Security, Medicare, and other “mandatory” spending programs. Through them, ever growing numbers of people “are entitled to certain expenditures out of the budget without any reference to how it’s going to be funded. Where the productivity levels are now, we are lucky to get something even close to two percent annual growth rate. That annual growth rate of two percent is not adequate to finance the existing needs.”

Greenspan’s prognosis: “I don’t know how it’s going to resolve, but there’s going to be a crisis.”

All Tax Revenue Will Go Toward Health Care, Social Security, and Net Interest by 2032

His pessimism stems from the political reality that elected representatives lack the will to address entitlement spending. “Republicans don’t want to touch it. Democrats don’t want to touch it. They don’t even want to talk about it. This is what the election should be all about in the United States. You will never hear one word from either side,” Greenspan told Bloomberg.

He is right, of course. Even self-described “conservative” Republicans who tout smaller government in principle don’t actually vote for it in practice. Mathematically, they can’t.

Once you rule out cuts in military and entitlement spending, as most Republicans do, what’s left on the table to cut is small potatoes. Going after waste, fraud, and abuse isn’t going to stop the bleeding of red ink as millions of Baby Boomers withdraw from the workforce and expect to collect trillions in unfunded benefits that have been promised to them.

The good news (if you’re a politician) is that under our monetary system you don’t ever have to cut. You don’t have to ensure that your promises of future benefits can be met with revenues. You can be as fiscally irresponsible as the Federal Reserve’s willingness to expand the currency supply permits you to be. The Fed stands ready to buy up government bonds in unlimited quantities, making a sovereign default practically impossible and enabling the government to borrow at artificially low interest rates.

The government debt bubble is a product of the fiat monetary system. Under a gold standard, Congress would be limited by what it could actually extract from the people in taxes.

Gold Standard

Here’s what one of the world’s most famous economists said recently about gold: “If we went back on the gold standard and we adhered to the actual structure of the gold standard as it existed prior to 1913, we’d be fine. Remember that the period 1870 to 1913 was one of the most aggressive periods economically that we’ve had in the United States, and that was a golden period of the gold standard.”

The self-described “gold bug” economist quoted above is none other than Alan Greenspan!

Yes, the longest-serving chairman of the world’s most powerful fiat money establishment.

The same Alan Greenspan who helped both Republican and Democrat administrations drive up the national debt from $2.4 trillion to $8.5 trillion in the years 1987-2006.

The same Alan Greenspan whose implicit open-ended backing of U.S. debt markets helped Congress grow unfunded liabilities by untold trillions more than is even reported in official debt figures.

The same Alan Greenspan who engaged in shocking interventions and currency devaluations, starting with bailing out Long Term Capital Management in 1998 and followed by a blowing up of the tech bubble, and, after its crash, the housing bubble.

Why Did Greenspan Commit His Horrific Monetary “Crimes”?

At last, Greenspan sees the light. Perhaps in private he always did. Before he helmed the Fed, he was known as a free-market advocate who associated with novelist-philosopher Ayn Rand and strongly favored a gold standard. But unlike a Randian hero, Greenspan compromised his principles in his pursuit of power, fame, and social status.

Taken to its extreme, the phenomenon of Greenspan’s tenure was akin to the “banality of evil,” a concept that came into prominence following Hannah Arendt’s book about the Nazi trials. Arendt’s thesis, as described by author Edward Herman, was that people who carry out unspeakable crimes aren’t necessarily crazy fanatics, but rather “ordinary individuals who simply accept the premises of their state and participate in any ongoing enterprise with the energy of good bureaucrats.”

Why did Greenspan play a key role in undermining sound fiscal policies and sound money while he was at the height of his power and influence at the Fed? Why did he do so much to fuel asset bubbles and reckless debt spending? Only Alan Greenspan himself knows for sure, but we’re the ones paying the price.

 *Stefan Gleason is President of Money Metals Exchange, the national precious metals company named 2015 “Dealer of the Year” in the United States by an independent global ratings group. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC, and his writings have appeared in hundreds of publications such as the Wall Street Journal, TheStreet.com, Seeking Alpha, Detroit News, Washington Times, and National Review.

Brexit seen as more likely.  Fed worried.  Gold and silver on the rise 

Gold Today –Gold closed in New York at $1,294.30 up $9 on Wednesday rose strongly in Shanghai to $1,306 before rising again at London’s opening.

The $: € moved lower to $1.1260 from yesterday’s $1.1228 overnight. The dollar index moved to 94.48 down from 94.78.

Yuan Gold Fix

Trade Date Contract Benchmark Price AM Benchmark Price PM
2016  06  16

2016  06  15

SHAU

SHAU

275.16

272.75

277.07

273.14

Dollar equivalent @ $1: 6.5982

$1: 6.5967

  $1,297.09

$1,286.02

$1,306.09

$1,287.86

Shanghai led the way again, after New York closed, taking the price higher to be followed by London taking it higher still, where the gold price barged through overhead resistance and the psychological resistance at $1,300 and hit $1,310. We see this, in part, as HSBC buying in London to supply  yesteradya’s SPDR gold ETF demand as well as Chinese investors rushing into gold.

For supplies to be this tight in London tells us that the improvement in the technical picture was reinforced by the supply/demand position in London as U.S. demand continues to burgeon.

We note from Shanghai’s performance, that demand in London or New York cannot be met in China, as no gold exports are allowed from there. Hence Shanghai is untouched by any supply squeeze in the developed world.

Only the Chinese bank ICBC could relieve such demand from its London stocks. But its task, while it is to provide gold to the market as a ‘market maker’ it is not bound to keep the London market ‘in balance’ from its stocks. But it is tasked by China to supply gold to China too. Consequently, it is entirely proper to provide balance in the Chinese gold market, not London. This means that the ICBC will send the gold not needed to be a market maker in London, to China to meet that demand.

Global financial markets are appearing to be discounting an exit of the U.K. from the E.U. and the consequential turmoil now expected. Next week may well prove a ‘watershed’ week for the financial world. If the U.K. votes to stay in the E.U. it will be a damp squid, but if not it may well prove to be ‘the event’ that triggers disruptions that will benefit gold and silver tremendously.

LBMA price setting:  $1,307.00 up from Wednesday 15th June’s $1,282.00.

The gold price in the euro was set at €1,164.37 up from Wednesday’s €1,141.79.

Ahead of New York’s opening, the gold price was trading at $1,305.50 and in the euro at €1,168.44.

Silver Today –The silver price closed in New York on Tuesday at $17.54, up from Tuesday’s $17.38 a rise of 16 cents. Ahead of New York’s opening the silver price stood at $17.71.

Price Drivers

Not only did the Fed hold rates at current levels, it did warn of game changing events such as Brexit, that could affect U.S. growth and the dollar. It stated that while jobs growth was slowing, economic growth was rising. After Janet Yellen’s statement the gold price jumped to over $1,294 in line with more buying into the SPDR gold ETF.

The next event, overnight, to affect markets was the Bank of Japan’s Kuroda confirmation that it would do nothing more to stimulate Japan’s economy. At this point the global markets reacted by falling. It was not just in Japan, it was across the world, why?

We see this as a signal that Japanese monetary stimulation is not succeeding, confirmed by a stronger Yen, now trading at 104.26 to the U.S. dollar. Falling equity markets around the world tell another story. While they are the remaining source of decent yields and likely to stay that way, prospects for global growth are slowing and now affecting global equities, which are either ‘toppy’ or beginning to fall. In other words, the dark clouds that we have been seeing on the horizon are moving above us. What next? Brexit is next, next Thursday with results seen later that day.

Gold ETFs – On Wednesday the holdings of the SPDR gold ETF(GLD) & Gold Trust(IAU) rose another 2.14 tonnes as more bullion was purchased into the gold ETF, leaving its holdings at 900.75. 0.75 of a tonne of gold bullion was added to the Gold Trust, leaving its holding at 197.65 tonnes.

Since January 4th this year, the holdings of these two gold ETFs have risen 301.632 tonnes. This could prove more that the central banks disclose they bought over 2016. With the distinct possibility of Brexit ahead we could see this total leap over the rest of the year.

Silver –Silver is going at full pelt now and should continue to do so in the weeks ahead.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

Gold and Silver:  Like a cat waiting to pounce

Julian Phillips’ latest view on what’s going on in the gold and silver markets.

Yesterday (Thursday) was a quiet day for the gold, silver and currency markets after alarming, stronger moves in the Yen and while Janet Yellen’s comments were being digested. Today sees the same process going on, but the tightening of the trading range of both gold and silver tells us a strong move is imminent.

This is one of those days in the precious metal markets when people are looking around, waiting for something to happen. It’s Friday now, the day when we usually see the most action.

In our opinion the markets in gold and silver are rather like a cat getting ready to pounce. We expect the moves to be higher, but it could need more days of consolidation such as we have seen in the last week.

It’s also one of those days when one stands back to fine tune one’s perspective. When we do that we see the Fed [and Treasury] making clear that they don’t want a strong dollar, something the media seems unwilling to accept. The consequences of this are to see the anguish among emerging and other developed world central banks as they see their currencies strengthen. Japan is openly discussing ways of making their currency weaker while at the same time Abe is stating countries should not intentionally weaken their currencies. Are we to believe that they do not intend to weaken their currency with their present interest rate policies? Surely not!

Interest rates and their prospects are driving exchange rates globally as well as equity markets. Their rises have little to do with positive economic prospects, making such rises stand on questionable foundations. This leaves them vulnerable.

With the ‘powers that be’ themselves warning of future crises, the prospects for gold and silver remain good and not subject to single daily events.

China added 9.02 tonnes of gold to its reserves last month. This is down from over 20 tonnes the previous month.

Gold ETFs – We saw no sales or purchases into the SPDR gold ETF on Thursday. There were however, purchases of 0.3 of a tonne into the Gold Trust yesterday. This leaves their holdings at 819.596 and 187.26 tonnes in the SPDR & Gold Trust respectively.  

Silver – The silver price continues to be consolidating around $15 still, ahead of a strong move.

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance