Depending on who you are, whether a trader or investor in this market, we all use different terms to describe this type of price movement in gold. Technical traders call it consolidation, fund managers call it sideway trading and financial advisors call it boring.
Whatever term you prefer to use, the bottom line is the market is just sitting here looking for a direction. So the question remains, what bit of news would propel the market in one direction or the other?
Let’s look at the probabilities of an interest rate hike in the future using the CME Fed Watch tool. An interest rate increase is the biggest threat to the bulls in the gold market. So for those who like to play a game of chance, here are the projected odds for the months ahead.
- July 27th meeting, next week a 2.4 percent chance of a rate hike.
- Sept. 21st meeting, a 20 percent chance of a rate hike.
- Nov. 2nd meeting, just before the election a 21.6 percent chance of a rate hike.
- Dec. 14th. meeting, a 47.8 percent chance of a rate hike.
Strong job numbers of late and impressive housing data here in the states, I’m sure have the Fed presidents biting at the bit to raise rates. But weak economic data still coming out of Europe and negative interest rates on sovereign bonds continuing to increase keeping the Fed from moving forward with a rate hike.
In the event that they pull a surprise at the July meeting, all hell would break loose and in my opinion watch out below, as both the Dow and metals market I expect will take a big turn to the downside. But as you can see the odds are practically zero.
So as the song goes: Let’s all sing…
“Roll out those lazy, hazy, crazy days of summer
Those days of soda and pretzels and beer
Roll out those lazy, hazy, crazy days of summer
Dust off the sun and moon and sing a song of cheer”
Seems both gold and silver decided to put out the lounge chair and umbrella and enjoy the summer sun with a sign on their apartment door saying: Back after the 2016 Presidential election.
Pina Colada anyone ?
Have a wonderful Friday.
Disclaimer: This editorial has been prepared by Walter Pehowich of Dillon Gage Metals. This document is for information and thought-provoking purposes only and does not purport to predict or forecast actual results. It is not, and should not be regarded as investment advice or as a recommendation regarding any particular security, commodity or course of action. Opinions expressed herein are current opinions as of the date appearing in this editorial only and are subject to change without notice and cannot be attributable to Dillon Gage. Reasonable people may disagree about the opinions expressed herein. In the event any of the assumptions used herein do not come to fruition, results are likely to vary substantially. All investments entail risks. There is no guarantee that investment strategies will achieve the desired results under all market conditions and each investor should evaluate its ability to invest for a long term especially during periods of a market downturn. 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. This information is provided with the understanding that with respect to the opinions provided herein, that you will make your own independent decision with respect to any course of action in connection herewith and as to whether such course of action is appropriate or proper based on your own judgment, and that you are capable of understanding and assessing the merits of a course of action. You may not rely on the statements contained herein. Dillon Gage Metals shall not have any liability for any damages of any kind whatsoever relating to this editorial. You should consult your advisors with respect to these areas. By posting this editorial, you acknowledge, understand and accept this disclaimer.