After the dollar index reached 95.66 yesterday, surpassing the June high of 95.54 (but failing to hold above that level), a short covering Gold rally ensued. Spot Gold had hit a low of $1,211 and quickly rallied from there as the dollar index started its sell off.
The gold rally was also fueled by President Trump’s comments from yesterday when he said he was frustrated with the Federal Reserve and said the Central Bank could disrupt our strong economic recovery by raising interest rates. Two more rate hikes are expected this year. The question remains how much influence could the White House have on future Fed policy?
Some Gold ETF investors thought that might be good news for the price of Gold and jumped into the market reversing the most recent significant trend of redemptions.
With large open interest in Comex options expiring next week, Wall Street traders were quick to cover their positions as the dollar index reversed course. Their actions fueled the rally as witnessed in increased trading activity in the futures market.
Wall Street trader consensus is, as long as the dollar index remains above the 95 level, a sustained rally in the price of gold is unlikely. Traders will be watching other major world currencies like the Euro, Sterling and Yen to give them possible future guidance in the price of Gold.
The price of Silver is just following the action in the Gold market. As we have been reporting, CME thousand ounce bars held in their depositories continues to slowly rise. The combined registered and eligible silver held in Comex Depositories reported today is 279,954,224.592 ounces or approximately 280 million ounces.
Some dealers are reporting some life in thousand ounce bar activity and that’s a good sign. But in my opinion, the best indicator that a bottom has been reached in the Silver market will be either a draw down in warehouse stocks or refiners finally getting some premium for one thousand ounce bars, instead of using the exchange to cash in their outturned product.
If the dollar index continues its decline (currently at 95.14) the next level of resistance in the price of Gold will be the old double bottom number breeched earlier in the week at $1,236.
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.