Dollar Weakens – Gold Grows

Dollars Weakens - Gold Grows

The same old story emerges day after day. Dollar higher, the price of Gold lower and vice versa.

Today the dollar is showing some signs of weakness as she’s losing some ground to the Sterling and Euro.

Between eligible and non-eligible, CME Silver warehouse stocks are now approaching 297 million ounces on the shelves. Refiners still using the exchanges to unload outturned material. So if you see any commercials that state the supply of silver is drying up, just change the channel.

The Palladium EFP continues to widen over supply concerns, putting the Palladium market in a steeper backwardation to the March Futures contract. Some dealers now quoting minus 80 minus 70. These quotes I’m sure are for very small quantities.

The word of the day is “PAUSE”

There are several significant news stories that are in, “PAUSE” or “WAIT AND SEE MODE.”

First, the headlines that are the most important at those about the trade tariff negotiations with China. Now within the 90-day window, both sides are working towards a settlement. The question remains, can they come to an amicable agreement?

Next, the crazy gyrations going on with the Brexit negotiations. After delaying a vote on the Brexit exit in Parliament yesterday, British Prime Minister Theresa May is heading across Europe looking to drum up some support. While back home, there are many MPs considering a no confidence vote against her.

Political turmoil all across Europe seems to be in the news. Many are saying Theresa May is politically dead in the water. The people of the UK voted in a populist manner for Brexit, but the establishment in Parliament doesn’t agree and seems to be fighting it tooth and nail. Right now the madness will continue, because no one seems to believe there is a way out.

French President Emanuel Macron is totally backing down to the protestors. Now it looks like he is in the same shape as Theresa May, politically totally dead in the water. The whole reason Macron was elected was that he promised to deliver the economic reforms that France needed and he would not back down to street protestors. Every leader before him has backed down and that’s why France now has a sluggish economy and is headed in the wrong direction.

Angela Merkel of Germany has lost all power, too. Her massive miscalculation of opening the doors to a million plus immigrants combined with a weakening economy has dethroned her as the leader of her party. Germany was the backbone of the European Union and now they seem to have cracks in their spine.

Some economists over the pond have been quietly starting to use the word “Recession.”

Now that brings us back from our trip across the water to talk about another possible “PAUSE” here in the States. That is a “PAUSE” in interest rate hikes.

Day after day, the odds of a rate hike in December are starting to diminish. No matter how many Fed Presidents share their opinions between meetings (and you all know how much I’m against that policy), in the end the decision will be totally data dependent. Our economy is still in good shape, but starting to flounder a bit. So, my advice to the Federal Reserve board is to not look solely at our economy and ignore what going on around the globe. Consider what the data is telling you globally, before you come to a decision to raise rates.

If they do raise rates in December, a “PAUSE” in raising rates in the first quarter should be in order.

Going forward, all these problems facing the global economy should have an impact on the Global Equity Markets.

But for the price of Gold, the driving force will continue to be the value of the U.S. Dollar against other world currencies. My concern is that with the rest of the world in economic turmoil and the value of other currencies taking a hit, how can the dollar decline and support higher gold prices? At this point, there seems to be no answer.

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.