Calm Markets & GDP Reactions

Calm markets and strong GDP

When I talk with financial advisors, most indicate that for the most part their clients are happy with their current equity holdings. The strong stance the President has taken regarding tariffs has brought the EU to negotiate an agreement on our terms and has, for the time being, created calm markets.

But interestingly enough, a few financial advisors I spoke with are telling their clients that any new money that they have to put into the market should be put into commodities as part of a true balanced portfolio.

Obviously, an investment in the Gold market could be a wise choice. The advice I shared with all the advisors I spoke to is to use a dollar cost averaging strategy to invest in the Gold market. As I indicated in previous editions of “The Market Gage,” I believe a strong rally in the price of Gold is just six months away. Once we get these rate hikes out of the way and the Equity market runs out of steam as companies reconsider their capital outlays, things should look much better for the Precious Metal markets.

Because most of the investor interest seems to still be in the equity markets at this time, and understandingly so, the price of Gold continues to be under pressure. Both Wall Street Gold Traders and Wall Street technicians agree that we must break thru the $1,236 spot level and maintain above for a day or two the price of Gold will continue just to spin its wheels. Until then they have no interest in playing in the Gold market.

There have been some bottom pickers around, as indicated by the inflows into the Gold ETF markets this week. Today is the first day since last Friday we see outflows in the Gold ETF’s. For the most part it seemed that as long as the price of Gold stayed above the $1,225 area investors were willing to try and bottom pick the market.

Yesterday was option expiration day on the CME. Interestingly enough, right after we hit the expiration time, the price of Gold dropped below the $1,225 area and selling emerged. It seemed to me there were large institutions that wanted to hold that price above the $1,225 strike price until expiration.
Once the time expired their bids dried up immediately.

The U.S. gross domestic product report was released within the past 30 minutes. So far, gold and silver have only ticked down a tad on the strong, but not as strong as expected, GDP number. The second-quarter GDP hit 4.1% (the highest since 2014), however, analysts had been expecting a climb to 4.4% (some going as high as 5.1%).

At this writing, August gold futures have slipped $3.60 an ounce to $1,222.10 and August silver futures were down .02 to $15.41.

The U.S. dollar index and stock markets also lowered a bit from their modest gains earlier this morning.

At the time of this report, we seem to be holding the $1,216 level and according to the charts if we continue to sell off the $ 1211 level in spot is a key level to hold. If that level is violated, my fear is that the shorts will have their way with the market and try to test the $1,200 dollar level.

Overall I don’t expect that level to be violated, as I believe the $1,211 level will be well supported.

Have a wonderful Friday.

Disclaimer: This editorial has been prepared by Walter Pehowich of Dillon Gage Metals for information and thought-provoking purposes only and does not purport to predict or forecast actual results. This editorial opinion is not to be construed as investment advice or as a recommendation regarding any particular security, commodity or course of action. Opinions expressed herein cannot be attributable to Dillon Gage. Reasonable people may disagree about the events discussed or opinions expressed herein. In the event any of the assumptions used herein do not come to fruition, results are likely to vary substantially. It is not a solicitation or advice to make any exchange in commodities, securities or other financial instruments. No part of this editorial may be reproduced in any manner, in whole or in part, without the prior written permission of Dillon Gage Metals. Dillon Gage Metals shall not have any liability for any damages of any kind whatsoever relating to this editorial. You should consult your advisers with respect to these areas. By posting this editorial, you acknowledge, understand and accept this disclaimer.