Gold Market Morning: Gold Waiting For The Fed!

GoToday –New York closed at $1,268.60 yesterday after closing at $1,268.90 Monday. London opened at $1,267.24 today. 

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

- The $: € was slightly weaker at $1.1217 after yesterday’s $1.1212: €1.
- The Dollar index was weaker at 96.92 after yesterday’s 97.04.
- The Yen was slightly stronger at 110.14 after yesterday’s 110.16:$1. 
- The Yuan was slightly stronger at 6.7976 after yesterday’s 6.7979: $1. 
- The Pound Sterling was stronger at $1.2785 after yesterday’s $1.2700: £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.]

As you can see from the above, Shanghai traded both yesterday and today lower than New York and London. This was the first time we have seen that happen! New York closed higher than Shanghai yesterday and London opened higher than Shanghai. On these numbers Shanghai is not a buyer from the west today. 

We have heard that China stands accused of gold price manipulation. They are accused of keeping prices low until they have acquired a particular number of tonnes. Meanwhile, Shanghai prices have consistently been at a premium to western prices. This is not the path down.

With no gold allowed to leave China, if this were true, it would have to be conducted in New York with derivatives of sales of physical gold in London, through Chinese banks in London. They would therefore have to buy these tonnages in London first, before they could sell them.

Since 2013 the reports of U.S. banks selling physical gold alongside huge derivative positions have been evident. Goldman Sachs has been at the forefront of these. The evidence therefore supports the story that it has been western banks that have engineered ‘bear raids’ at considerable profit as the gold price fell since then as the gold price was in decline. There is also evidence that western central banks have until 2009 at least, wanted sales of gold to hold back gold prices, as high prices places question marks against the value of currencies. Discussions on the B.I.S. ‘Gold Pool’ prior to this century, Central Bank Sales since 1975. Has this changed? We think not. But as we pointed out yesterday, the power to force prices down is no longer within their reach, due to Asian demand and higher prices. The evidence is that western institutions have manipulated gold prices for over 40 years in one way of another.

While there is no evidence of Chinese gold price manipulation we have seen gold’s pricing power shift to Shanghai. But with Shanghai trading gold lower than New York and London, that pricing power evaporated yesterday and today, because of demand for gold in western markets. Shanghai’s figures tomorrow will expand that story. It certainly does not seem that lower Shanghai gold prices can pull London and New York down.

What is very true is that China has bought as much gold as they can when the bears did drive prices down and will continue to do so whenever they can. Will higher prices make them stop buying? We think not as the Chinese middle classes continue to burgeon.

Silver Today –Silver closed at $16.76 yesterday after $16.94 at New York’s close Monday.

LBMA price setting:  The LBMA gold price was set today at $1,268.25 from yesterday’s $1,261.30.  The gold price in the euro was set at €1,131.71 after yesterday’s €1,124.55.

Ahead of the opening of New York the gold price was trading at $1,265.60 and in the euro at €1,130.15. At the same time, the silver price was trading at $16.95. 

Gold _{(very short-term)} 

The gold price should consolidate, in New York today.                                                                                             

Silver _{(very short-term)} 

The silver price should consolidate with a firm bias, in New York today. 

Price Drivers

Technical Picture

The pullback in gold seems to have been halted as New York held prices at around $1,268. We are seeing the gold market and currency markets wait for the Fed’s statement today.

Gold ETFs – Yesterday, once again, saw no purchases or sales into or from the SPDR gold ETF but a purchase of 0.45 of a tonne bought into the Gold Trust.

Their holdings are now at 866.998 tonnes and, at 207.06 tonnes respectively. 

Since January 4^th 2016, 262.31 tonnes of gold have been added to the SPDR gold ETF and to the Gold Trust.  Since January 6^th 2017 62.26 tonnes have been added to the SPDR gold ETF and the Gold Trust.

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Julian D.W. Phillips 

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