A recent report released by the World Gold Council revealed that first-quarter identifiable Gold demand slowed to a 10-year low of 973.5 tons. They also reported stable jewelry demand, increased consumption from the electronic products and a sharp selloff in physical demand for coins and bars from here in the states, in Europe and the Far East.
The price of Gold this morning is struggling to find some support at these levels as technical levels like the (RSI) relative strength Index at 24, are indicating a (buy) entry point for traders. On the other hand, the VIX Index (also known as the Wall Street Fear Index) has softened up a bit as the equity markets are expected to open higher this morning.
The Dollar is down by 50 basis points this morning into negative territory after trading higher overnight to a level of 95.33. This alone is helping support the price of Gold this morning.
Until some significant news emergences to boost the price, the trend is still lower with the next soft level of support at the $1,248 level again and major support level at the $1,232 figure.
Gold’s Safe Haven Status Losing Its Shine?
I wanted to share with you a story released in Wednesday’s edition of the Financial Times covering gold’s “troubles.” Here are some highlights:
“A deepening global trade war is failing to stir Gold investors, despite the metal’s reputation as a venerable haven asset.
“In the midst of volatile stock markets and rising tensions between the U.S. and China, the price of Gold has fallen to its lowest level in more than six months. Year-to-date Gold is down 4 per cent.”
FT stated that, with few exceptions, “Traders remain firmly on the sidelines.”
“Aggregate open interest on the Comex Gold Futures Exchange in New York, which measures the number of futures contracts outstanding, has fallen to the lowest level since 2016.
“For investors there have been few catalysts to buy gold this year as the dollar has strengthened. US interest rates have risen steadily since January and with the Ten year Treasury bill yield at 2.84 percent, that makes holding Gold less attractive since the metal provides no fixed income return.”
(Read the entire FT article here)
Next I wanted to share with you a story or opinion that’s all over the internet that, I don’t buy one ”bit.” It goes something like this:
“The reason Gold’s so low is Bitcoin. The cryptocurrency is soaking up a lot of the money that would have been invested gold. Bitcoin does everything gold does.”
“Now that America is embracing Blockchain-Crypto in a big way, more gold stagnation is bound to occur. Sure, bitcoin has dropped a bit over 50% this year, but big Blockchain startups like this year’s Consensus represent the first stages of a paradigm shift.”
Ok then, if Bitcoin is sucking up all the investment that would have found its way into the gold market, why is the price down more than 50 percent this year? Any answer? I think not! And by the way, I just indicated that the price of Gold was down 4 percent for the year, fairing much better than its so-called rival, Bitcoin. Even with a stronger dollar and higher interest rates, the price of Gold held up pretty well to this point. Also, those who express this opinion don’t understand how to separate Blockchain startup companies from new Cryptocurrency startups.
And most important, it seems that almost every week a story emerges about a hack on a Cryptocurrency company where millions of dollars were stolen and the company is now working with law enforcement to try to retrieve the stolen money. Cryptocurrencies are traded all over the globe and one can imagine it’s almost impossible to identify the hackers, never mind trying to recoup the lost dollars.
One thing I know for sure, my investment in physical Gold is either in my possession or in an authorized, secure, insured depository or bank giving me the confidence that when I wake up one morning I will not see a story that all my Gold was stolen. We all work too hard for our money to give some hacker a chance of taking everything we own.
Let the buyer beware.
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.