We start the week in negative territory as selling emerges overnight in the Far East. Bond markets are closed here for the holiday, but action in the Dollar Index has put pressure on the price of Gold and Silver.
The Dollar Index now over the 96 handle, giving traders in the Far East and Europe, as well as here in the States, a reason to sell Precious metals.
Very active currency markets are seen, as the euro, sterling and Japanese yen are all in negative territory.
If I may translate, what this all means is that the U.S. Dollar continues to be very strong and since the price of Gold is traded in dollar terms it makes Gold much more expensive in other countries. Higher interest rates and a strong dollar can only continue to depress the price of Gold.
All markets will continue to focus on Geopolitical events, especially U.S. Trade talks with China and developments in the Brexit negotiations.
Most Wall Street Gold traders don’t see Gold testing the most recent low of $1,160. The stronger dollar just keeps the price of Gold locked in its trading range between $1,180 and $1,210.
The price of Silver is in the same shape, as there is little change in CME warehouse stocks sitting at over 288 million ounces. There just seems to be so much Silver on the shelves of the exchanges and dealers at this time, that a sustained rally in the price of Silver is highly unlikely.
So as a reminder, the Mid-term elections are just four weeks away and as I have said before, if there are any surprises the equity market could take it on the chin and the price of Gold could recover and break out of its trading range doldrums.
Price of Gold Compared to Price of Bitcoin
What does the price of Gold and the price of Bitcoin have in common? They are both stuck in a trading range.
Bitcoin has been stuck in a narrow trading range for the 14th day in a row. The technical charts indicate that the holders of Bitcoin need the market to move above the $6,800 dollar level to confirm a breakout.
For those who follow moving averages in Bitcoin for guidance, a move below the lower band at $6,290 would see the bears take over. Right now, the prospects of a downside break appear highest, as Bitcoin is again struggling to clear the 50-day moving average currently located at $6,640. (Current price $6,609.00)
Whereas in the Gold market, all eyes are on the most recent Commitment of Traders (COT) report released Friday where the holders of long positions reduced their holdings by 3,261 contracts and the holders of short positions reduced their positions by 9,018 contracts. Overall traders are still holding a net short position which historically, is highly unusual.
Translated, the reduction in both the long and short holders indicates their patience has run out.
The price of Gold is no different from what the Bitcoin market is experiencing. Gold needs to break out of the $1,210 level and stay there for a day or two before having any chance of trading higher. At this point, even though we are trading lower today, the odds of a break out to the upside STILL exceeds the chance of the price of Gold testing the low reached weeks ago, at $1,160.00.
Both markets are looking for a catalyst to move them to the next level.
We will just have to wait for some news to move the needle.
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.