Geopolitical Risks And How They Impact Gold

The Market Gage - Dillon Gage's Precious Metals Newsletter

Can Geopolitical risks accelerate a rally in precious metals? We’ll explore that topic today, but first let’s look at this morning’s market news:

Precious metal prices are in recovery mode after testing and trading thru the 100-day moving average.

Helping the price of gold this morning is a weaker dollar and Ten-Year Treasury yields.

For those who follow the platinum market, significant inflows were seen in the last two days. An amazing 73,000 ounces have been added to the platinum ETF. I wonder where they found all this physical metal?

On to equities

Recently corporate earnings have been fine and everyone seems to be ignoring high PE ratios. The poor 1st quarter GDP figures were just a transitory number according to the Federal Reserve, nothing to be concerned with, so it seems that with no new news on the table, the equity markets have gone into so-called hibernation mode with little movement.

Just look at the most recent VIX Index fear factor hitting a ten-year low. For those not familiar with the CBOE Index, it is a measure of the implied volatility of the SNP index options, calculated and published by the Chicago Options Exchange. It is referred to as the uncertainty index, or the fear gage. It’s only up slightly from the lows, but nonetheless heading up, as some people in the marketplace realize that Washington is as organized as a college dorm room. Still, the majority of the investors believe Healthcare and Tax reform will come this year. What’s your prediction?

Now for Washington

If the Trump agenda is put in place some economists predict a 2.3 percent growth rate.
Sounds ok but it’s not the 3 to 4 percent the President promised during his campaign.

If you look at the President’s tax plan, as I described in my last article, the only real winners are corporations and the Wall Street elite. How can this country move forward with the
Democrats saying everything President Trump proposes is dead on arrival?

As the fighting continues in Washington, it is just matter of time before the market realizes that the Washington gridlock is like the street’s around Rockefeller Center at Christmas time.

Now let’s tackle my headline question.

You cannot discount Geopolitical risks in these markets, even though things around the globe seem to be quiet. Do you think North Korea or Iran will change their tactics and become submissive to the U.S.? Did you get your fill of the election news over the past few weeks of French headlines? Well if you didn’t know it, an election is just two weeks away in Iran. One topic not generally shared at America’s dinner tables. There are six candidates with six different views. The winner will have a major impact on Iran’s foreign policy. Please don’t ask me to explain each candidates policies as from what I’ve read. I don’t expect any one of the six to become bosom buddies with our President.

Here is my take on the market landscape and why gold will be the investment of choice in the second half 2017 into the first half 2018. Washington in the end will get nothing done and the market will give up on the hopes and promises of this administration. Even if they do pass the Healthcare bill and congratulate themselves for a “job well done,” the insurance companies will reject their plan, because they don’t answer to Washington they answer to their shareholders.

The insurers might not want to embarrass the politicians they are in bed with by offering insurance with high premiums and high deductibles just to make themselves look good to share holders. And we all now know the proposed tax plan does very little if anything for middle class Americans.

One thing seems to have good odds. As a gold investor, you might not need too much patience if something major happens globally. Like a confrontation with North Korea or Iran. It will just expedite the inevitable and stop any agenda Washington has on the table, good or bad.

Have a Wonderful Friday.

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.