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Silver Market Morning: Mar 10 2017 - Gold consolidating after the Jobs report!

Julian D. W. Phillips
|
Friday, March 10th

Gold Today New York closed at $1,201.90 on the 9th March after closing at $1,208.70 on the 8th March. London opened at $1,197.00 today.

 

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

  - The $: € was weaker at $1.0611: €1 from $1.0535: €1 yesterday.

- The Dollar index was stronger at 101.82 from 102.17 yesterday.

- The Yen was weaker at 115.40:$1 from yesterday’s 114.50 against the dollar.

- The Yuan was weaker at 6.9160: $1, from 6.9113: $1, yesterday.

- The Pound Sterling was barely changed at $1.2166: £1 from yesterday’s $1.2164: £1.

 

Yuan Gold Fix

Trade Date

Contract

Benchmark Price AM 1 gm

Benchmark Price PM 1 gm

2017 3 10

2017 3 9

2017 2 8

SHAU

SHAU

SHAU

/

272.74

274.14

/

271.92

274.09

$ equivalent 1oz @ $1: 6.9160

$1: 6.9113

$1: 6.9049

 

/

$1,227.43

$1,242.23

/

$1,223.74

$1,242.18

 

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.]

 

At the close in Shanghai today, the gold price was trading at 270.9 Yuan once again, which directly translates into $1,218.32. But allowing for the difference of gold being traded this equates to a price of $1,213.32. This is more than the New York close and $16.32 higher than London.

 

The demand for gold in Shanghai at the moment is not sufficient to lift its own prices let alone those of New York or London, as we see above. This is in the face of a weakening Yuan. The head of the People’s Bank of China stated that the Yuan exchange rate will remain stable going forward. We are always wary of central bank statements on exchange rates, because history shows that such statements are usually way off the mark. We can only summize that the PBoC is going to filter purchases of U.S. dollars for investment and maintain such capital / Exchange Controls to ensure strategic foreign purchases that favour China overall are permitted. It is only in this way that the exchange rate of the Yuan can be managed. But will Chinese gold investors believe this?

 

The investments of Chinese capital that don’t meet these criteria are unlikely to be permitted. We believe that gold purchases from overseas are deemed of strategic benefit to China.

 

This will not prevent the expansion of Yuan usage in international trade from rising.

 

LBMA price setting: The LBMA gold price was set today at $1,196.55 down from yesterday’s $1,204.60.

 

The gold price in the euro was set lower at €1,127.76 after yesterday’s €1,140.61.

 

Ahead of the opening of New York the gold price was trading at $1,204.40 and in the euro at €1,130.79 At the same time, the silver price was trading at $17.07.

 

Silver Today –Silver closed at $16.97 at New York’s close yesterday against $17.24 on the 7th March.

 

Gold (very short-term) The gold price should consolidate with a weaker bias, in New York today.

 

Silver (very short-term) The silver price should consolidate with a weaker bias, in New York today.

 

Price Drivers

The Jobs report came out at a 235,000 increase in jobs followed a 238,000 rise in January that was more than previously estimated, the best back-to-back rise since July. The unemployment rate fell to 4.7%, and wages grew 2.8% from February 2016. This is positive for U.S. future growth.

 

It seems that once the numbers were out, the gold price recovered, as it was no longer awaited item. Rather like the expectation of an oil strike raised share values of a producer, but confirmation of expectations let the price fall. Likewise with the gold price!

 

In line with that, the dollar weakened too.

 

As you can see the gold price is falling faster in the euro than in the dollar at the moment as the euro strengthened. While Mario Draghi said little of significance yesterday he indicated that the easing policy would continue for a long time still.

 

Soft Chinese demand [waiting for the dollar to react?] contributed to this but so was dealer’s ‘marking down’ of the gold price. As you can see below the volumes of sales from the U.S. based gold ETFs was not large enough to move prices, but, as we said yesterday in such a wary, buyer-sidelined market, it takes small volumes to move prices. So, it looks like we will see gold prices consolidate until the Fed speaks next week.

To get a feel of the market, we say that if a substantial buyer came in prices would move disproportionately higher. The market is in a delicate position right now even after the jobs report, ahead of the Fed’s statement and rate rise next week.

The question now is, does this report imply four rate hikes, not just two. This was why the gold price was being marked down so much. But Oriental physical gold demand is strong and likely to get stronger as we move up to April, the start of this year’s wedding season in India.

Gold ETFs – Yesterday saw sales of 2.665 tonnes from the SPDR gold ETF and 0.3 of a tonne from the Gold Trust. Their respective holdings are now at 834.101 tonnes and 197.22 tonnes.

 

Since January 4th 2016, 230.291 tonnes of gold have been added to the SPDR gold ETF and to the Gold Trust. Since January 6th 2017 20.21 tonnes have been added to the SPDR gold ETF and the Gold Trust.

 

Regards,

 

Julian D.W. Phillips

 

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Global Gold Price (1 ounce)

 

Today

Yesterday

Franc

Sf1,215.06

Sf1,224.02

US

$1,204.40

$1,206.35

EU

€1,130.79

€1,142.81

India

Rs.80,163.66

Rs. 80,566.08

   
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