Dollar Index Drop Boosts Gold

The Market Gage - Dillon Gage's Precious Metals Newsletter

The price of gold opens up the trading week slightly lower on light trading volume overnight. Gold received a boost last week from a weaker dollar index. The dollar index fell Friday to 95.38, the lowest since July 5th this year.

Second quarter GDP reported at 1.2 percent, way below the estimate of 2.6 percent. This report continues to weaken the FED hands on the prospect of raising rates anytime soon. So in turn, with that news and the weaker the dollar, the price of gold rallied to current levels seen today. Now with no pending news for the market to digest, I expect gold to trade in a tight range again at these levels.   

 Silver still well supported over the $20 dollar level, even with many dealers sitting on excess inventory. Dealers continue to lower their bids on silver products, as some indicated this morning they are holding more inventory then they want to. As the market experiences the summer doldrums, I expect dealers will be lowering their bids further as some indicate enough is enough. Lowering their bids to unattractive levels will result in clients looking elsewhere for better prices. That’s a strategy that might come back to haunt them, but in some cases they have no choice.

The price of oil is on a slippery slope once again as some traders are expecting the price to test the $ 40 level. IEA (the International Energy Agency) reported that they estimated the second quarter 2016 worlds’ oil supply of crude exceeded demand by 200,000 barrels a day.   A strong case for lower prices is ahead.  

A couple of Wall Street Gold traders I spoke to this morning tell me they  will be trading oil today instead of gold. As one guy put it, trying to be funny, “I’m going in for an oil change today.” The traders I spoke with believe that with the attractive volatility, trading oil seems more exciting and will give them better opportunities to make a short term profit.

 Have a wonderful Monday.

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.