Gold and Silver Market Morning: Dec 14 2016 - Gold and Silver waiting for the Fed?

Gold Today–New York closed at $1,158.60 yesterday after closing at $1,162.20 on the 12^th December.London opened again at $1,160.00 today.

Overall the dollar is slightly weaker against global currencies today.

-The $: € was weaker at $1.0649: €1 from $1.0643: €1 yesterday.

-The Dollar index was slightly weaker at 100.87 from 100.97 yesterday. 

-The Yen was stronger at 114.95: $1 from yesterday’s 115.30 against the dollar. 

-The Yuan was weaker at 6.9025: $1 from 6.9009: $1 yesterday. 

-The Pound Sterling was slightly stronger at $1.2656: £1 from yesterday’s $1.2672: £1.

Yuan Gold Fix

Please note that the Shanghai Fixes are for 1 gm of gold. From the Middle Eat 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.]

Shanghai prices held $30.48 higher levels than prices in New York. London opened at a higher discount to Shanghai of $29.08.

It is again reported that the requirement for importing gold into China is a ‘licence for each batch’ of gold imported. Yes, the PBoC can restrain these licenses to limit imports, but it is unlikely that they would hold back such licenses. There is no confirmation of the refusal to issue licenses by the PBoC to gold importers, so we would question such control until there is evidence.

The withdrawals from the SGE were at record levels in November and the declining Yuan would boost demand in December too, but we would like to see the SGE withdrawals for December before we accepted that the PBoC is holding imports back.

Some report the ‘premium’ of SGE prices over London is entirely due to such restraint and this would be logical, but take a look at Yuan pricesand you will see the declining prices on the SGE and the relative stability ofYuan prices argues for steady to declining demand. That’s why we see Shanghai reflecting prices of physical gold as opposed to those of ‘paper’ gold.

This stability of prices is shown in the unwillingness of Shanghai prices to decline when London and New York declined, not in rising prices in China.

LBMA price setting:The LBMA gold price setting was at $1,160.95 this morningagainst yesterday’s $1,157.35. 

The gold price in the euro was set higher at €1,090.45 after yesterday’s €1,090.40.

Ahead of the opening of New Yorkthe gold price was trading at $1,161.95 and in the euro at €1,091.75.  At the same time, the silver price was trading at $17.10.

Silver Today –Silver closed at $16.91 at New York’s close yesterday from $17.07 on the 12^th December.

Gold_{(very short-term)} The gold price is waiting for the Fed’s statement, in New York today.      

Silver_{(very short-term)} The silver price will respond strongly to any move in the gold price, in New York today.

Price Drivers

The Fed’s announcement is what will move markets today, not the rate hike itself, as this has been discounted already. If there is no rate hike then that’s a different matter.

Gold markets are marking time ahead of the announcement later today. This is the last statement they will make before Trump takes power. Will that change things, or some part of the statement, reflect this? We doubt it, but nothing is certain these days. Trump has already pointed fingers at the Fed saying they are the cause of the current ‘bubbles’ in markets.

What is likely is that the Fed will continue to wait to see the evidence on which it will act and that points to no more hikes until the second half of the year. On balance the slow pace of interest rate hikes is positive for gold, particularly in the light of the cuts in production put forward by oil producers. Higher oil prices will spur [bad] inflation making it likely that interest rates are lower than inflation as growth will be badly impacted by higher oil prices.

As you see below, even the sellers of gold have paused waiting for the Fed. Do not be surprised to see a surprising gold market today!

Gold ETFs – Yesterday, there were no sales or purchases from or into the SPDR gold ETF but a sale 0f 0.51 of a tonne from the Gold Trust holdings, leaving their respective holdings at 856.259 tonnes and 196.95 tonnes. The slowing of sales to such low levels is proving supportive of the gold price.

 Silver –Silver is continuing to look solid above $17.00 but this could change in a heartbeat.  

Regards,

Julian D.W. Phillips 

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