Dollar Pressures Precious Metals

The Market Gage - Gold is Elemental

The Dollar Index is trading higher this morning putting pressure on all four metals. At the time of this report, both Gold and Silver were sitting at key support levels at $1,248 and $16.00. If violated next level of support in the price of Gold is not until $1,232 and Silver a little closer at $15.75. Trading overnight was quiet in the Far East and now in Europe, so I don’t expect a different scenario here in the states when we start trading for the day.

Overall the trend is still lower, even though the technical indicated a market that is extremely oversold. So with a market this quiet it won’t take much to move the needle either way.

Key Factors Pressuring Gold and Silver

Besides higher interest rates and the threat of continued rate hikes, one just has to look at the Gold ETFs in the last two months. Since the beginning of May Gold ETFs redemptions amounted to almost 74 tons. So now that these bars are now back in the market all this does is to create more unneeded inventory that someone has to finance.

Also hurting the price of Gold is the weakness in the Indian Rupee hitting an all-time low versus the U.S. dollar last week making it even more expensive for their investors to buy the yellow metal. This past Thursday, the Indian currency fell 0.7 percent to 69.0925 per dollar, surpassing its previous record of 68.8650 reached in 2016. Their bonds also took it on the chin where their 10-year bond yield hit 7.94 percent. Higher oil prices are not helping their cause at the moment, too.

In Silver, there continues to be an enormous amount of one thousand ounce bars in the Comex warehouses, not to mention how much silver has been bought back by dealers and is sitting on their shelves. Refiners still trying to capture a premium for their outturned thousand ounce bars, having little luck, are still resorting to issuing them on the exchange to get paid.

The only highlight in the Silver market has been a steady demand on the industrial side. Without this support I can’t imagine where Silver would be trading.

All these factors are having a direct impact on the price of each metal and until the investor returns to the market, these escalating inventory figures will continue to rise, hindering any advances in the price of each metal.

Have a wonderful Monday.

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.