Gold and Silver Market Morning: Dec 16 2016 - Gold and Silver stabilizing?

Gold Today–New York closed at $1,127.40yesterday after closing at $1,142.60 on the 14^th December.London opened again at $1,133.85 today.

Overall the dollar is stronger against global currencies today.

-The $: € was stronger at $1.0441: €1 from $1.0478: €1 yesterday.

-The Dollar index was stronger at 102.95 from 102.54 yesterday. 

-The Yen was weaker at 118.17: $1 from yesterday’s 117.81 against the dollar. 

-The Yuan was much weaker at 6.9463: $1 from 6.9352: $1 yesterday. 

-The Pound Sterling was weaker at $1.2430: £1 from yesterday’s $1.2520: £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 fell around 1% today, after New York’s fall of 1.3% signalling a calmer market despite the fall caused by ongoing ETF sales.When translating Yuan prices into the dollar equivalent we see the ‘discount’ of New York to Shanghai prices rising to $44.19 the highest ever seen. Against London’s opening of $1,133.85 the London ‘discount’ was $38.19, again the highest we have ever seen. Once again this is accounted for by the dollar’s ongoing strength.

This confirms that the moves in gold prices in the different markets are a reflection of currency movements not sales and purchases of gold so much. The arbitrage opportunities are huge for those selling gold to sell into China, not London or New York.

LBMA price setting:The LBMA gold price setting was at $1,134.85 this morningagainst yesterday’s $1,132.45. 

The gold price in the euro was set slightly lower at €1,085.31 after yesterday’s €1,085.45.

Ahead of the opening of New Yorkthe gold price was trading at $1,135.00 and in the euro at €1,086.12.  At the same time, the silver price was trading at $16.08.

Silver Today –Silver closed at $16.00 at New York’s close yesterday from $16.80 on the 14^th December.

Gold_{(very short-term)} The gold price will test current levels as a bottom, in New York today.      

Silver_{(very short-term)} The silver price will follow the gold price, in New York today.

Price Drivers

After the Fed’s announcement comes the discounting of the best possible scene in markets. Then comes rumination on the realities of life. Likewise in markets! The Fed’s confidence in the economy and the hopes that the future under Trump will see “America great again” are being discounted. The bond market is diving, as future rates will be much higher.

The euphoria is taking the U.S. equity market higher despite the interest rate future that we will see next year through 1919.

Such an immediate discounting of such a bright future will bring us close to the bottom in the gold price as U.S. sellers dump the gold in gold ETFs and turn to equities and the exported funds which sought greener pastures comes home. Once this process is complete and the dollar’s rise exhausted the bottom in the gold and silver price will be established.

Now balance these expectations against the real expectations, across the world and one sees the future for currencies, debt, stability and uncertainties painting a different picture. After the initial reactions to Trumpanomics and interest rates being seen now, the markets will settle down and the dollar’s rise [against U.S. interests] will be stabilized and likely fall back. Likewise, gold and silver prices will see a rally as Asia gobbles up the gold thrown up by the selling in the U.S., with prices moving back up to Shanghai prices, as the Yuan continues to fall.

The scene in the E.U. is worsening as interest rates are being held down through Q.E. for another year. Apart from the Italian banking crisis moving towards dramatic events [Monte dei Paschi] the Greek debt crisis is back on stage as well. 2017 promises to see the E.U. and the euro in trouble as a result.Either of these could spark an even bigger crisis than markets are currently factoring in for the euro and E.U.

A President Trump may defy all expectations of his international behaviour and do the unforeseen. We will have to wait until the ‘ides of March’ 2017, which we see the end of his first ‘100 days.’ We could be in a completely different world then with global power held by a very small number of men. We have looked at the potential scene being in place then and all of them include a solid place for gold with gold and silver prices looking to rise!

Gold ETFs – Yesterday, there were sales of 7.118 tonnes from the SPDR gold ETF and no sales from the Gold Trust, leaving their respective holdings at 842.327 tonnes and 196.35 tonnes. As the ripples from the Fed’s statement diminish we expect the selling to slow to a trickle. This will remove the downward pressure on the gold price, leaving only the dollar affecting the price negatively.

Since January 4^th this year, 238.204 tonnes of gold has been added to the SPDR gold ETF and to the Gold Trust.  So far this year over 162 tonnes have been sold out of these two funds.

Regards,

Julian D.W. Phillips 

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