Gold Continues To Slip

Gold Continues To Slip

The price of Gold continues to slip in a downward spiral overnight in Asia weakening to its lowest level since January, 2017. After yesterday’s pause in the price, the price of Gold came under some renewed selling pressure due to the U.S. dollar reaching its highest level since June of last year.

The situation in Turkey continues to give support for a higher greenback. In the past, a currency crisis like Turkey’s would attract Gold investors, but this time the crisis failed to revive the precious metal’s safe haven status.

Overnight, the technical spot level of $1,189.20 was broken thru and now traders are watching to see if the price of Gold can hold its next technical support level at the $1,182 level. If this level is violated I expect a drop off to the $1,160 level is possible. But let’s not forget it’s all about the Dollar, so any sell off in the greenback will support higher prices.

As one trader described the current situation, “the price of Gold is like a beach ball being held underwater by a heavy weight (like the U.S. dollar) any slippage on that beach ball can cause the ball to move upward in a heartbeat, catapulting the ball out of the water and high up into the air.” A weird description, but I get his point. Currently, there are huge short positions on the books and it wouldn’t take much to create a strong short covering rally. But for now, with the way the U S Dollar has been trading, that possibility has a low probability of happening.

Is the future of Cryptocurrencies in jeopardy?

Last week, the U.S. Securities Exchange Commission (SEC) postponed its decision on approving the listing and trading of a Bitcoin exchange-traded fund (ETF) until September 30.

For those not familiar with this product, ETFs are securities that track a basket of assets, in this case cryptocurrency assets (or as some like to call them securities) as an exchange-traded fund, like an index fund.

The ETF under consideration is powered by investment firm VanEck and financial services company SolidX, and is expected to list on the Chicago Board of Exchange (CBOE) BZX Equities Exchange. The SEC now has almost two more months to consider a proposed rule change by CBOE Global Markets Inc. that would allow the fund to list.

Back in April, SEC Chair Jay Clayton said Cryptocurrencies shouldn’t be regulated in the same way as stocks and bonds. His statement gives a clear understanding of how the regulatory agency views the cryptocurrency market. When a cryptocurrency becomes sufficiently decentralized, as the widely popular Bitcoin and Ether have, the SEC no longer views it as a security. In contrast, smaller initial coin offerings, or ICOs, are almost always securities in the SEC’s eyes. There is a definitive distinction between the two, because securities are subject to the same regulations as normal stocks.

While Bitcoin itself remains unregulated, Bitcoin futures are traded on regulated exchanges and cash settled. Unlike Gold and Silver future contracts, there are no mechanisms to deliver Bitcoins against a short futures position.

The notice states that the SEC has received more than 1,300 comments on the proposed rule change to list and trade shares of SolidX BTC shares issued by the VanEck SolidX Bitcoin Trust. Per the document, within 45-days of a filing of a proposed rule change, or within 90 days should the Commission deem necessary, the Commission will approve, disapprove, or extend the period of consideration.

Last month, the SEC delayed its decision on investment firm Direxion’s application for a Bitcoin ETF until Sep. 21. The SEC also rejected an appeal by Bats BZX Exchange, Inc. (BZX) to list and trade shares of the Winklevoss Bitcoin Trust, originally filed in 2016.

The SEC cited the largely unregulated nature of Bitcoin markets as the principal reason for refusing the application, stating, “When the spot market is unregulated, there must be significant, regulated derivatives markets related to the underlying asset with which the Exchange can enter into a surveillance sharing agreement.”

The SEC’s decision last week has had a direct negative impact on the price of Bitcoin and other Cryptocurrencies.

Bitcoin is not perfect. It has a lot of problems that it is going to have to overcome, but to label it dead or to call for it to be replaced by something new is naive and shortsighted. Of course, there are many still out there who claim that it’s only a matter of time before cryptocurrencies go belly up.

So I guess we have to tip our hats to the ones who continue to try to develop new applications, with government and or exchange approvals, bringing Cryptocurrencies to the next level. If this ETF gets approved, it should bring back to the market some excitement that has been lost over the past year and bring new investors into the fold. If not, I cannot see anything at this time that restore confidence in this declining market.

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.