Gold Market Morning: August-4-2017

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

-The $: € was weaker at $1.1881 after the yesterday’s$1.1849: €1.

-The Dollar index was weaker at 92.74 after yesterday’s 92.92.

-The Yen was stronger at 110.02 after yesterday’s 110.66:$1. 

-The Yuan was strongerat 6.7200after yesterday’s 6.7237: $1. 

-The Pound Sterling was weaker at $1.3149 after yesterday’s $1.3232: £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.]

New York closed almost $11 higher than Shanghai’s close yesterday. But today, with the ongoing weakness in the dollar, the dollar gold price in London rose. But we need to look at the movement of the Yuan price of gold in Shanghai today to see the movement in the Yuan price of gold. There we see that there is a steadiness in the Yuan gold price in the last few days with only a 1 Yuan movement in the price both ways.

If we look back over the last few days we see that this has been the case even while New York tried to create volatility in the New York price. Earlier this year we pointed out that we expected a drop in the volatility of the global gold price because of the cost of speculating in Shanghai being so much now. Add to this the LMEprecious arbitrage contracts that are now in operation and, no doubt, the arbitrage desks in the large banks.

As a result, any attempt to cause large volatility inthe physical markets is defeated by that gold being sent east, making speculation far less profitable. Gradually this is defeating volatility in the west and brought the current steadiness to the rising price.

We see this as the pattern going forward in global gold markets.

Silver Today –Silver closed at $16.63 yesterday after $16.73 at New York’s close Wednesday.

LBMA price setting:The LBMA gold price was set today at $1,269.30 from yesterday’s $1,261.80.The gold price in the euro was set at €1,068.34 after yesterday’s €1,065.35.

Just before the opening of New Yorkthe gold price was trading at $1,269.00 and in the euro at €1,068.99. At the same time, the silver price was trading at $16.72.

Gold_{(very short-term)}

The gold price should be stronger, in New York today.      

Silver_{(very short-term)} 

The silver price should be stronger in New York today.      

Price Drivers

The gold price has a steadiness that is unusual, particularly now when it breaks out then sits on support before moving up a few notches. In the past we would have expected it to spike quickly. But, as we mention above, we see this happening because of the influence of Shanghai on global gold prices.

But the gold price has been steadily pushing higher, consolidating then moving higher again. With today being the busiest day of the week [with no market for two days over the weekend] we would not be surprised to see the gold and silver prices move higher today in New York.

The dollar is firmly in its bear market, but the media are calling for a rally as it is ‘oversold’. When it comes to a currency we do not see it moving like a share price. This applies to the dollar in particular. Hence we do not give too much weight to the Technical picture of the dollar, right now as we are seeing structural changes in the currency world.

Based on a great deal of experience in markets, we feel that we are on the brink of some dramatic moves in currencies and precious metals. This may well be triggered by U.S. bond markets and thereafter equity markets.

Gold ETFs –The SPDR gold ETF holdings remain unchanged as no sales or purchases took place yesterday but in the Gold Trust sales of 0.58 of a tonne took place. The SPDR gold ETF and Gold Trust holdings are at 791.875 tonnes and at 211.43 tonnes respectively.

Since January 4^th 2016, 163.318 tonnes of gold have been added to the SPDR gold ETF and to the Gold Trust.  Since January 6^th 2017, 0.283 of a tonne of gold has been added to the SPDR gold ETF and the Gold Trust. The gold acquisitions by these two funds in 2017 have returned to the positive and now stand at 0.843 of a tonne in 2017.

Regards,

Julian D.W. Phillips 

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