Gold Today –New York closed at $1,279.60 yesterday after closing at $1,278.20 Friday. London opened at $1,289.50 today. 

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

–         The $: € was slightly stronger at $1.1246 after yesterday’s $1.1264: €1.

–         The Dollar index was slightly weaker at 96.73 after yesterday’s 96.77. 

–         The Yen was stronger at 109.52 after yesterday’s 110.51:$1. 

–         The Yuan was stronger at 6.7954 after yesterday’s 6.8036: $1. 

–         The Pound Sterling was barely changed at $1.2904 after yesterday’s $1.2905: £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.]

 While New York saw the gold price rise a little it was Shanghai that gave the spurt to the gold price trading at $1,293 late in their day today. London was pulled up at the opening to just $4 below Shanghai.

Silver Today –Silver closed at $17.57 yesterday after $17.52 at New York’s close Friday.

LBMA price setting:  The LBMA morning gold price was set today at $1,287.85 from yesterday’s $1,280.70.  The gold price in the euro was set at €1,144.40 after yesterday’s €1,137.04.

Ahead of the opening of New York the gold price was trading at $1,294.15 and in the euro at €1,148.62. At the same time, the silver price was trading at $17.73 

PRICE DRIVERS

Mainland China is set to import about 1,000 metric tons from Hong Kong in 2017, says, president of the Hong Kong gold exchange. That compares with net purchases of 647 tons last year and would be the biggest since 2013, data from the Hong Kong Census and Statistics Department confirmed.

Local consumption was up 15% in the first quarter, with sales of bars for investment climbing more than 60% and dwarfing a 1.4% rise in jewelry buying, according to data from the China Gold Association.  

Imports from Switzerland topped 100 tons in the first four months of the year, according to calculations on data reported by the Swiss Federal Customs Administration. In December, China imported 158 tons from Switzerland, taking the total for the year to 442 tons, up from 288 tons in 2015.

One has to be guarded about figures from Hong Kong being representative of Chinese demand. Gold enters China from Switzerland but also through Beijing and other ports of entry. In addition, the country mines around 450 + tonnes a year. It also imports gold directly from mines it owns outside the country. So the figures mentioned here are  just part of the picture. What we do learn from these is that Chinese demand is running close to record levels. The government has encouraged this as a matter of policy, so as to build up the nation’s gold. Gold is not allowed to be exported from the country. The volatility of the Stock Exchange there is a discouragement for long term investors and is not regarded as competition for gold, as in most parts of Asia gold is not bought for profit but for financial security.  As the Chinese middle classes burgeon so more and more gold investors arrive in the market. On top of this present middle classes continue to buy more.

India

Ahead of GST, jewelers increased their purchases to replenish inventory, so as to profit from demand for gold after the additional GST was imposed. From a year ago the gold imports surged four-fold to 103 tonnes. Now that the GST rate increase has happened, it is likely that internal gold demand will jump until these extra stockpiles are reduced. We fully expect Indian gold imports to slow until the harvest time is over, round about September.

With the forecasts for the monsoon positive this year and indeed having already started in  some regions, we believe demand later in the year will increase strongly.

Inflation in the E.U. and U.S.

The Federal Reserve’s preferred price measure rose 1.7% in April from a year ago, down from 1.9% in March and 2.1% in February. Core inflation, which strips out volatile oil and food costs, also slowed to the weakest annual pace since 2015. This raises questions about next week’s rate hike.

In the Euro zone, while producer prices rose 4.3% from a year earlier in May, that pressure has yet to flow through to consumer inflation. Euro zone inflation decelerated to 1.4 % in May, the weakest reading this year, from 1.9% a month earlier. We do not expect the E.C.B. to begin slowing their stimulus program until there is a marked change in this figure.

Gold ETFs – Friday, saw no purchases of gold into the SPDR gold ETF, but saw purchases of 0.66 of a tonne of gold into the Gold Trust. Their holdings are now at 851.003 tonnes and, at 205 tonnes respectively.

Since January 6th 2017 43.759 tonnes have been added to the SPDR gold ETF and the Gold Trust.

Julian D.W. Phillips  – GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance