The New York gold price closed at $1,071.70 down from $1,072.70 on yesterday’s close.  In Asia prices held at the same level then the dollar strengthened to 97.90 up from 97.67 on the dollar Index. The euro is at $1.0956 down from $1.0975 yesterday against the dollar. The London a.m. LBMA gold price was set at $1,067.20 down from $1,072.00, on Thursday.  In the euro the fixing was €972.79 down from yesterday’s $979.00. Ahead of New York’s opening, the gold price was trading at $1,064.40 and in the euro at €970.33.

The silver price in New York closed at $14.11 down 4 cents. Ahead of New York’s opening the silver price stood at $13.92.

Price Drivers

The big news of the day is the announcement that the Yuan gold Fix, based on a 1 kilo bar of gold will begin in April. It had been expected by the year’s end but now we have a firm date.  It will be based on physical demand and supply, not on futures positioning as on COMEX.

We do see it having a major impact on global gold prices despite London and New York basing prices on ounces, not kilos [to move from one to the other would require re-refining]. Nevertheless, we do expect arbitrage activity to smooth out prices across the world. With suppliers moving their gold more towards the physical markets in Asia and re-refining gold bars into kilos, new supplies will veer more to the metric measurements than ounces. Over time, we do expect both London and New York to accept kilos as well as ounce sized bars and coins. It is the dealing in gold that matters not the weights they are dealt in, that impacts price. Therefore, the shift in pricing power to Shanghai is inevitable.

In the meantime, the flow of re-refined kilo bars continues to rise to Asia and in particular China. The shift is inexorable as Chinese middle classes continue to grow at the expense of those in the developed world. It is only a matter of time before physical deals overwhelm futures and options trading in determining prices.

As we wrote this we saw speculators coming into the market to attack the gold price once more taking the price away from currency moves.

The Fed’s announcement is due on Wednesday of next week, after the 2-day meeting of the FOMC. So, we expect little drama in the markets until then. This applies to all the world’s financial markets.

Once again, we saw no sales from the SPDR gold ETF and nothing from the Gold Trust, on Thursday. The holdings of the two gold ETFs, the SPDR gold ETF and the Gold Trust remain at 634.63 tonnes in the SPDR gold ETF and at 157.07 in the Gold Trust.