New York closed with the gold price at $$1,146.80 up from $1,135.70 yesterday. While China was closed and ahead of London’s opening the price moved up to $1,150. China reopens tomorrow. When London opened the gold price slipped slightly to $1,148.60 after which it was set at $1,147.90 up from $1,136.90 at the LBMA gold setting. The dollar Index was down at 95.47 from 95.89 and the dollar trading against the euro at $1.1254 up from $1.1217. In the euro the fixing was €1,019.87 3.55 up from €1,013.55.  Ahead of New York’s opening gold was trading at $1,149.75 and in the euro at €1,020.41.

The silver price closed at $15.80 up 18 cents over yesterday’s close. Ahead of New York’s opening, silver was trading at $15.90.

Price Drivers

A piece of news that goes straight to the heart of the dollar’s hegemonic position in the global monetary system was released yesterday. China’s Yuan overtook Japan’s yen to become the fourth most-used currency for global payments in August. The Yuan was second for global issuance of letters of credit by value with a 9.1% share, compared with 80.1% for the U.S. dollar. This confirms that the Yuan is a ‘well-used currency’, which is part of the definition the IMF needed to be included as one of the Special Drawing Rights basket of currencies. In November the I.M.F. will review whether it will be included. The list currently comprises the U.S. dollar, euro, yen and the British pound.  Each step forward by the Yuan is an incursion into the dollar’s dominance of the global monetary scene. The persistent acquisition of gold by China both in its reserves and by Chinese citizens [The People’s Bank of China told us to consider gold owned by its citizens as part of its gold holdings implying that if needs be it would be acquired/confiscated by the PBoC] points to a greater role for gold in the monetary system in the future, in a multi-currency system.

Yesterday saw more short covering increases in long positions on COMEX taking the gold price through $1,140 resistance to $1,150 this morning. There are more shorts to be closed! The next level of resistance is close. If that falls, it’s a game-changer in the U.S. for the gold price.

While the paper gold market is seeing action, the U.S. physical gold market remains lackluster. Consequently, there were no increases in the holdings of the SPDR gold ETF or the Gold Trust. This leaves the holdings of the SPDR gold ETF at 688.983 tonnes and 160.62 tonnes in the Gold Trust.

Silver continues to outperform gold and is likely to keep doing so in the future. As we said yesterday, “If gold does breakout to the upside we may see a sprint higher by the silver price.” We are seeing the beginning of that now.