Gold Today –New York closed at $1,243.50 yesterday after closing at $1,251.5 yesterday. London opened at $1,246.00 today. 

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

-           The $: € was slightly stronger at $1.1145 after yesterday’s $1.1155: €1.

-         The Dollar index was stronger at 97.66 after yesterday’s 97.57. 

-         The Yen was stronger at 111.14 after yesterday’s 111.39:$1. 

-         The Yuan was slightly weaker at 6.8264 after yesterday’s 6.8258: $1. 

-         The Pound Sterling was weaker at $1.2627 after yesterday’s $1.2659: £1.

Yuan Gold Fix

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.]

Despite the central Bank in Hong Kong statement of yesterday that it wanted a stable exchange rate to the dollar, the Yuan has weakened a little in the last two days. This does not mean the policy has changed, just as it will not be a fixed exchange rate.

What is becoming clear is that Shanghai’s pricing power over the gold price is being proved this week and last, as it has been leading the way both ways.

Now the three global gold markets are in roughly in line with each other. Again, we are seeing evidence of Shanghai’s pricing power as speculation in the three global gold markets is at low levels and where it is seen it is having only a temporary impact on the gold price.

Speculative action is barely visible in the gold price after last week’s sale of 12 tonnes after the Fed. To us this is the influence of Shanghai which will draw off such gold sales. That move was an attempt to drive gold prices down, but it had only a small impact on the gold price.

  Silver Today –Silver closed at $16.41 yesterday after $16.65 at New York’s close Monday.

LBMA price setting:  The LBMA gold price was set today at $1,247.05 from yesterday’s $1,246.50.  The gold price in the euro was set at €1,118.83 after yesterday’s €1,117.74.

Ahead of the opening of New York the gold price was trading at $1,245.20 and in the euro at €1,117.47. At the same time, the silver price was trading at $16.44. 

Gold _{(very short-term)} The gold price should consolidate, in New York today.      

Silver _{(very short-term)} The silver price should consolidate, in New York today. 

Price Drivers

Shanghai

There has been no physical gold activity in the U.S. this week on the two WGC gold ETFs that we follow, telling us that the U.S. investor is sitting on the sidelines. London is moving in line with Shanghai and New York is following London. Shanghai was leading the way down but, at the moment, Shanghai has turned back up. The dollar is rising today and is not influencing the gold price.

We reiterate that the next strong move will be a very decisive one as the market’s demand and supply is into balance.

The market opening for gold in London is cautious and can turn either way in a heartbeat but is moving with Shanghai. It is drifting sideways with a slightly easier tendency so far today.

Oil

The oil price will affect global markets as it struggles to stay close to $50. Today it continues to fail to hold onto that price area. With U.S. production growing alongside that of Iraq and Libya growing supplies are countering the production cuts of others in OPEC and Russia. There is a distinct danger that the continued increase in overall oil production globally will take the oil price down further and into an area from where it is unlikely to recover for a long time.

This acts as a stimulus to the global economy as average oil costs will remain low for some time. Bear in mind we are talking much lower oil prices if this happens. Will gold fall on this? We think not, because to link to oil prices in the seventies was as much a monetary issue as anything else. Then it was important that the oil price rise, so as to increase demand for the U.S. dollar. The reverse is true with oil prices falling.  We believe that other currencies may well be being used to pay for oil now.

Russia &  Chinese gold reserves

It is reported that Russia has added another 21.8 tonnes to its reserves in May. It faithfully reports its reserves to the I.M.F. whereas China has ceased doing so.

Please note that the failure to report additions to reserves by the People’s Bank of China does not mean it is not doing so.

As we have said before the P.B. of C. considers that it “owns gold through its people”. In other words, while the people technically own the gold in China, the P.B. of C. controls it. So control is far more important than ownership, with control having more than the rights of ownership!

Gold ETFs – Yesterday once again, saw no sales or purchases from or into the SPDR gold ETF 0r the Gold Trust.

Their holdings are now at 853.684 tonnes and, at 207.06 tonnes respectively.

Since January 4^th 2016, 248.996 tonnes of gold have been added to the SPDR gold ETF and to the Gold Trust.  Since January 6^th 2017 48.29 tonnes have been added to the SPDR gold ETF and the Gold Trust.

Regards,

Julian D.W. Phillips 

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