Gold and Silver Market Morning: April 18 2017 - Gold building strength below $1,300!

Gold Today–New York closed at $1,283.80 yesterday after closing at$1,281.50Thursday.London opened at $1,286.00 today.

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

 -The $: € was slightly weaker at $1.0649 after Thursday’s$1.0646: €1.

-The Dollar index was slightly stronger at 100.26 after Thursday’s 100.24.

-The Yen was slightly strongerat 108.84 after Thursday’s 108.99:$1. 

-The Yuan was slightly stronger at 6.8860 after Thursday’s 6.8847: $1. 

-The Pound Sterling was stronger at $1.2590 after Thursday’s $1.2559: £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.]

The Shanghai Gold Exchange was trading at 286.00 towards the close today. This translates into $1,286.84. New York closed $3.04 below Shanghai’s closing. London opened at a $0.00 discount to Shanghai. This left all three markets almost in line with each other, which is further testament to the ability of arbitrageurs to smooth out market differences. This is the first time we have seen a zero discount to London prices. It tells us that the gold price is going higher soon!

Shanghai nearly hit $1,300 yesterday on the fear of an outbreak of war between North Korea and the U.S. The use of North Korean artillery to hit Seoul in South Korea made even the Chinese chase gold higher. The presence of the U.S. in North Korea is totally unacceptable to China. The fear of that has not gone away, as the North Koreans simply failed to launch a missile. They will try again.

LBMA price setting:The LBMA gold price was set today at $1,285.00 from Thursday’s $1,286.10.

The gold price in the euro was set at €1,203.3 afteryesterday’s €1,208.40.

Ahead of the opening of New Yorkthe gold price was trading at $1,285.05 and in the euro at €1,203.29. At the same time, the silver price was trading at $18.40.

Silver Today –Silver closed at $18.41 yesterdayafter $18.43 at New York’s close Thursday.

Gold_{(very short-term)} The gold price should consolidate with a stronger bias, in New York today.      

Silver_{(very short-term)} The silver price should consolidate with a stronger bias, in New York today.

Price Drivers

North Korea

President Trump has made a fortune in his days before the presidency from his decisiveness, his confrontational negotiating abilities and from his dominant personality. We are seeing these traits being used in his international dealings. The North Korean situation is already seeing his personality in action. But this time, the brinkmanship is capable of taking the U.S. into a war that could be at best a repeat of the 1952 war. That drew in China fully.

But this time the U.S. will not take on an undeveloped China, but the world’s second largest economy and an almost developed China at that. Such a war is likely to become far bigger in Asia than Vietnam both in scope and size. Will this be part of “Making America Great Again?” What is for sure is that the gold price will soar, if an outbreak of violence takes place.

As you can see U.S. gold investors are picking up their purchases into gold ETFs both because of this threat and because U.S. buyers buy on the rise. After Trump said the ‘Dollar was too strong’, the Treasury Secretary said a strong dollar is good.So, who’s in charge?

India’s gold imports saw a big rise between January and March 2017, with total imports for the period hitting 230 tonnes. That excludes gold smuggled into the country, which we believe could be much more.

To put that in perspective, for the seven months between April to October 2016, gold imports totaled just 264 tonnes. In fact, imports for the Jan-Mar 2017 quarter were the strongest for those months since 2013.If this keeps up we will see 1,000 tonnes imported for the year and far higher if we could include smuggled gold.

As we reported last year the government/Reserve Bank of India would need all the time between November and May to replace all the old non-legal tender banknotes with new ones. This process is now just about complete and Indian are buying gold heavily again. It is clear that many Indians who opened bank accounts in which to deposit the old notes could well be withdrawing their funds and returning back to cash dealings. We see this as the attempted crackdown on the “Black Money” alternative financial system in the country, has failed.

With the marriage season underway and a major festival soon to happen, Indian gold demand is hitting new highs.

Gold ETFs –Yesterday saw purchases of 6.841 tonnes into the SPDR gold ETF and a purchase of 1.2 tonnes into the Gold Trust. Their holdings are now at 848.921 tonnes and at 202.87 tonnes respectively.

Since January 4^th 2016, 250.437 tonnes of gold have been added to the SPDR gold ETF and to the Gold Trust.  Since January 6^th 2017 40.381 tonnes have been added to the SPDR gold ETF and the Gold Trust.

Regards,

Julian D.W. Phillips 

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