The U.S. Dollar Index is maintaining its strong posture still above the 97 level, in turn keeping the price of spot Gold hovering around the $1,200 dollar level.
This past week, the Dollar index reached a 16 month high causing nervous holders of long positions in Gold to head for the exits.
With the continued strength in the U.S. Dollar, the Precious Metals arena will continue to face a strong headwind until some of the geopolitical risks are settled. Two big stories on investors’ minds are trade talks with China and the ongoing Brexit negotiations. These two stories alone have caused significant movement in these countries’ currencies, giving strength to the U.S. Dollar.
A settlement in either one of these two big issues should pressure the greenback and boost the price of Gold back to its most recent highs.
Because of the stronger dollar and the Fed policy of continuing their aggressive rate hike agenda, the price of Gold has fallen almost 13 percent since its high this past April.
Some Financial Advisers have indicated that they are starting to see their clients cash out both their Gold holdings and some Tech Equity positions and just sit in cash for the time being.
There is so much news to decipher at this time, creating uncertainty in the market and that’s one thing investors don’t like to see.
Checking in With The Vix
It has been a while since we spoke about the VIX Index. For those who are not familiar with the VIX Index here is why it’s important in gauging market expectations, it represents the market’s expectation of 30-day forward-looking volatility. It is derived from the price inputs of the S&P 500 index options providing a measure of market risk and investors’ sentiments. It is also known as the “Fear Gage” as investors and traders look to the VIX values as a way to measure market risk.
Recently, the CBOE VIX Index has been rising higher with concerns of continued market volatility and geopolitical uncertainties.
The longer these trade talks continue, the more volatility we can expect in the Equity markets. The question remains, will the Trump administration continue to dig in its heels and play hardball, or will they come to an agreement at their next face-to-face meeting and end this madness.
In the meantime, I expect the price of Gold to follow the dollar step by step until the Brexit negotiations are settled and we come to some agreement in the trade talks with China.
Have a wonderful Wednesday.
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.