Silver Market Morning

Gold Today –New York closed at $1,222.00 up $2.30. In Asia the gold price lifted to $1,230.00. London took it up and it was Fixed at $1,225.75 up $0.75 and in the euro, at €1,073.101 down €7.652, while the euro was nearly a cent stronger at $1.1423. Ahead of New York’s opening gold was trading in London at $1,224.30 and in the euro at €1,072.91.

Silver Today – The silver price closed at $16.86 up 7 cents. Ahead of New York’s opening it was trading at $16.92.

Gold _{(very short-term)} The gold price will consolidate, today in New York.

Silver _{(very short-term)} The silver price will consolidate, in New York today.

Price Drivers

There were sales of 1.792 tonnes of gold from the SPDR gold ETF and of 0.72 of a tonne from the Gold Trust on Thursday, but gold prices bounced off the 100-day moving average and rose in Asia as Chinese demand kept feeding though, but still not reflecting the huge demand China is seeing. The holdings of the SPDR gold ETF are at 771.513 and at 167.03 tonnes in the Gold Trust.

Chinese demand is very strong with the offtake from the Shanghai Gold Exchange reaching 255 tonnes in the first four weeks of the year as validated by the withdrawal tonnages from the exchange. This was confirmed by Chinese officials as an accurate reflection of total Chinese demand. I have written at length about this in the upcoming issue of the Gold Forecaster for this week.

We must note that total demand, as confirmed by the World Gold Council, in China, includes purchases of gold by Chinese banks for use in their financial system. The bottom line is that ahead of the Chinese New Year on the 19th February demand in China is greater than newly mined gold production and scrap supplies. But this does not feed through to the developed world markets because gold is a one-way traffic into China with none coming out. Until there is an ability of the Chinese gold market to tap into developed world market immediately, without the cumbersome process of buying the gold, re-refining it into 1Kg bars [in Switzerland, usually] then moving it into China, the influence of Chinese demand will not be felt in the London/New York markets fully.

This I believe is coming, as a major Chinese bank is now showing interest in becoming a member of the London “Fixing” where 90% of the world’s physical [please note that this is the marginal physical demand, as the bulk is contracted] gold is transacted. London’s Over-the-Counter [OTC] market is shrinking now, reflecting the huge amounts travelling to Asia. If such needed liquidity is forthcoming through this process between China and London, I expect to see Shanghai set up its own daily “Fix” eventually making Shanghai the center of world gold dealings. But until the ‘pricing power’ over gold shifts to Shanghai, through the facilitation of true liquidity between the two markets, we will continue to see global gold prices dictated by the markets of London and New York. That’s why you can have lackluster prices in NY & London, while global demand is overtaking supply. [Subscribe to www.GoldForecaster.com & www.SilverForecaster.com].

Silver– The silver price will react strongly to any gold price move. www.SilverForecaster.com

Regards,

Julian D.W. Phillips for the Gold & Silver Forecasters