Gold Finally Gets Weaker Dollar Boost

Gold Finally Gets Weaker Dollar Boost

For the past few weeks, we have been seeing a declining Equity Market, so much so, that most of the experts are calling it now a true bear market.

So as investors sell off their stocks, where is all that money now headed? A good portion of those dollars are headed to the Bond Markets.

With a crazy, volatile Equity Market, investors are now looking for safety and stability, and for most, U.S. Treasuries are their first choice.

For those not familiar with the Bond Market, let’s try explain all the options.

The Bond Market is really comprised of several markets: the Treasury Bond Market, the Corporate Bond Market and the Municipal Bond Market. Currently, the U.S. Ten-Year Treasuries are yielding 3.08 percent. That might be
good enough for many investors to head in that direction.

For Corporate and Muni Bond investors, a declining economy might just be enough for investors to “avoid” investing in those products at this time.

Oh, you must be wondering, why not invest in the Gold Market? Initially, when a stock market has this much volatility investors first move is to turn to a vehicle that pays interest.

Currently, the price of Gold continues to be range bound with little interest from investors and traders from advancing the price to new levels.

Speaking to many financial advisors, the kicker right now for investors in a declining Equity Market is raising cash to cover their margin calls. And for most, other than cash, the most liquid product in their portfolio is Gold. So cashing in their Gold holdings is an easy way to raise cash and cover their margin calls. This always seems to be the case when the Equity Markets plunge.

Eventually, when the smoke clears and investors look at long term investments in this kind of environment, many will once again turn to investing in the Gold market.

Today, U.S. Ten Year Treasuries are lower, in turn, yields are up and the price of Gold is finally getting a boost from a weaker dollar.

For the time being, I expect the price of Gold to find its way to higher prices, at a slow and steady pace, as investors convert their stock holdings into other products. A accelerated pace can occur if there is any news from the Fed that they might be thinking of pausing their aggressive interest rate posture.

On the other side of the coin, if a trade agreement is reached with China (at this point it doesn’t look possible until the G20 meeting), I expect the Equity Markets will get a major boost and the price of Gold will see downward pressure as the dollar strengthens once again.

Have a wonderful Wednesday and a fantastic Thanksgiving.

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.