Gold rises, silver soars – but……

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

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

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

Yuan Gold Fix

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

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

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

Price Drivers

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

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

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

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

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

Julian D.W. Phillips | | StockBridge Management Alliance


COMEX ‘almost ignores’ gold and silver supply and demand fundamentals

New York closed with the gold price at $$1,137.30 up from $1,114.30 on Friday. China remains closed until Thursday in its ‘Golden Week’ holiday. When London opened the gold price slipped to $1,135.00 after which it was set at $1,134.35 up from Friday’s $1,106.30 at the LBMA gold setting. The dollar Index was down at 95.58 from 96.30 and the dollar trading against the euro at $1.1268 down from $1.1165. In the euro the fixing was €1,006.70 up from €990.86.  Ahead of New York’s opening gold was trading at $1,133.00 and in the euro at €1,107.60.  

The silver price closed at $15.24 up from $14.56 or 68 cents over Friday in New York. Ahead of New York’s opening, silver was trading at $15.31.

Price Drivers

After what has been labeled a’ disastrous’ jobs report on Friday when only 142,000 job increases were reported against a 200,000 expectation the gold price leapt $25 in 15 minutes in New York despite there being no physical gold purchases into the two U.S. based gold ETFs. [This leaves the holdings of the SPDR gold ETF at 689.204 tonnes and 160.65 tonnes in the Gold Trust.]

After the jobs report the dollar immediately fell two cents against the euro although the gold price in the euro also rose €20 at the same time. With little gold actually traded we see just how large the influence of COMEX and dealers in gold is in the market place where demand and supply are almost ignored. The same is true in the silver market. As we have pointed out in our newsletter before, it will take the arrival of the Shanghai gold price setting to change the pricing of gold. With a Chinese physical price and a New York ‘COMEX’ price moving away from each other, arbitrageurs will trade between the two smoothing out price differential. This will cause a structural change in the gold price. The ‘Yuan Gold Fix” is scheduled to begin before the end of the year.

With China still closed, we did expect attempts to crush the gold price through small physical selling, but the jobs report appears to have put paid to that now. The Technical picture is now moving to a critical point which may see a strong move this week.  

The jobs report has made a re-appraisal of the future state of the U.S. and global economies necessary. If such reports continue to disappoint, it is certain financial markets will become even more volatile. While equity markets rose today, it was not on the prospects of a rosy future, but because better yields in equity markets against those in fixed interest markets will continue for the

next two or three months. Deleveraging will slow and the threat of more turmoil remains when interest rates eventually do rise.

Silver is rose a remarkable 68 cents on little trade in the Silver Trust, as dealers whipped prices higher to protect themselves.  

Julian D.W. Phillips for the Gold & Silver Forecasters – and

Yuan ‘fix’ will make gold less prone to bear raids

New York closed yesterday with the gold price at $1,119.70 up from $1,105.50. Gold then rose in Asia to $1,121.00. In the euro this was €991.16 up €11.11.  This morning the dollar index started the day at 95.26, slightly lower than the 95.59 of yesterday. The LBMA gold price was set at $1,118.15 up $8.40 from yesterday. The euro equivalent was €988.29 down by €0.31. Ahead of New York’s opening gold was trading at $1,117.55 and in the euro at €987.37.  

The silver price closed at $14.91 up 48 cents on yesterday in New York. Ahead of New York’s opening silver was trading at $14.85.

Price Drivers

Yesterday’s rise was not the strong move we are waiting for as it is within the trading range we expected to see for the gold price.

Today, we see the Fed pull the trigger on the direction of all global financial markets, something the besieged Ms Yellen is not happy about at all. Despite all the Fed’s efforts to remove the potential volatility after today’s statements, we expect to see markets volatile whatever she says. The markets are pointing to a 30% chance of a rate rise only. The data, to which Janet Yellen points to as her guide, is not sufficiently strong for a rate hike to be absorbed easily.

Meanwhile, until she speaks no market is making significant moves. Likewise, there were no dealings in the SPDR gold ETF or the Gold Trust yesterday. This again leaves the holdings of the SPDR gold ETF at 678.183 tonnes and 159.90 tonnes in the Gold Trust.

Over in China the financial authorities are going to regulate and considerably reduce High Frequency Trading, a practice that appears to be being blamed for the disruptive volatility and is deemed unfairly destructive to values. We have no doubt that this will also cover the Shanghai Gold Exchange.

Once the Yuan “Fix” is established, which we believe is soon, Yuan gold prices will be less prone to bear raids. We find it hard to believe that China will follow COMEX prices, as London does now. It is more likely that COMEX will follow the Chinese gold prices, particularly if arbitraging gold between the two markets is made efficient!

Silver– Silver jumped nearly 3% yesterday against gold’s 1% showing the potential price performance of silver later.

Julian D.W. Phillips for the Gold & Silver Forecasters – and