Silver Market Morning: July 19 2017 - Gold and silver markets continue to climb but the pace may slow!

Gold Today –New York closed yesterday at $1,242.10. London opened at $1,239.00 today.

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

  - The $: € was stronger at $1.1532 after yesterday’s $1.1559: €1.

- The Dollar index was slightly stronger at 94.77 after yesterday’s 94.64.

- The Yen was stronger at 111.94 after yesterday’s 112.44:$1.

- The Yuan was weaker at 6.7549 after yesterday’s 6.7481: $1.

- The Pound Sterling was slightly stronger at $1.3033 after yesterday’s $1.3026: £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.]

New York closed $2.78 lower than Shanghai’s close yesterday, with London opening today at a discount to Shanghai’s trading today of $8.22, a slightly widening discount to Shanghai. But London is being pulled up by Shanghai. Chinese demand is sufficient to lift prices there, despite the slower rise in the gold price in London. This bodes well for more rises in London and New York.

Today, the U.S. dollar recovered slightly, a normal market correction that does not deviate from its downward path. With the E.C.B. meeting tomorrow traders are now cautious and prefer to wait before taking new positions in the euro.

Silver Today –Silver closed at $16.27 yesterday after $16.12 at New York’s close Monday.

LBMA price setting: The LBMA gold price was set today at $1,239.85 from yesterday’s $1,237.10. The gold price in the euro was set at €1,074.72 after yesterday’s €1.070.25.

Ahead of the opening of New York the gold price was trading at $1,239.85 and in the euro at €1,075.51. At the same time, the silver price was trading at $16.23.

Gold _{(very short-term)} The gold price rise should continue but at a slower pace, in New York today.

Silver _{(very short-term)} The silver price should continue rising but at a slower pace, in New York today.

Price Drivers

The gold price is slowing its rise towards $1,250 and may struggle in the $1,240 area until after the E.C.B. meeting and the effect the meeting has on exchange rates thereafter.

We do expect that if Draghi is more dovish than the markets expects, the rise of the euro may halt, for now. If he is the slightest bit hawkish, we would expect to see the euro rise further. With inflation and wages performing less than expected we would expect him to caution against too many expectations concerning the withdrawal of stimulus measures too soon. He may well send out a similar message to the one Janet Yellen is sending out. Either way we do expect him to have a distinct impact on global financial markets, including gold and silver.

Gold continues to rise in the euro, which shows real demand for physical gold in the E.U.

Gold ETFs – Yesterday saw sales of 5.662 tonnes from the SPDR gold ETF but no change again, in the holdings of the Gold Trust. The SPDR gold ETF and Gold Trust holdings are at 821.448 tonnes and at 211.41 tonnes respectively.

These sales are substantial enough to move the gold price down, but they didn’t as the gold price continued to climb. We suspect that the physical gold being sold is being snapped up and on its way to China. The new ability to arbitrage between LMEprecious and Hong Kong is seeing high volumes right from the start. They may be responsible for the physical gold being arbitraged to Hong Kong. If that is true, we would expect not only the differential between London and Shanghai to narrow considerably, but for the lifting of the gold price in Shanghai to feed through to London quickly!

Since January 4^th 2016, 182.916 tonnes of gold have been added to the SPDR gold ETF and to the Gold Trust. Since January 6^th 2017 20.401 tonnes have been added to the SPDR gold ETF and the Gold Trust.

Regards,

Julian D.W. Phillips

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