Gold Hangs On Even With ETF Redemptions

The Market Gage - Dillon Gage's Precious Metals Newsletter

Where did everyone go?

I find it very interesting that the gold market has hung on even with strong with the significant Gold ETF redemptions over the last 12 business days and most important, even given the dramatic decline in the Gold futures open interest.

The CME Futures Gold open interest is down 200,000 contracts from the highs at approximately 421,000 contracts. I don’t remember seeing the open interest this low for quite some time.

So after speaking with my technical gurus, I have taken the other side of their trade. Last week I had reported that my tech friends indicated that the level the market had to hold was $1,191 in the December contract or we would see further declines.

At the time of this report we view the December gold price up $9.00 on the day at $1,187.50.

I think the technical boys have it all wrong. The selling pressure is totally out of gas. I believe the interest rate increases are already factored into the market and unless the FED surprises everyone and raises the FED rate 50 basis points in December, the selling pressure is totally extinguished.

So having the nerve to disagree with the tech guys, I’m doubling down on all the dinners I owe them for being right all year and predicting a gold rally is in the works.

Maybe the Trump rally in the equity market is out of gas also.

To summarize why I’m taking this stand:

  • CME Gold open interest has been declining and the market seems to be taking it well.
  • Financial advisors I spoke with report many, many folks have left the Precious Metal ETF market for the equity craze, as seen by the amount of Gold redemptions taking place.
  • The dollar rally has also run out of gas trading at 101.50 after reaching a year high of 102.05.
  • The market has already accepted a 25 basis rate hike in December.

This time of year you always hear equity traders on business news channels calling for a Christmas stock market rally. This year I’m asking Santa for a Christmas rally in precious metals. Otherwise, Santa will have to help me pay for the expensive dinner I’ll have to buy my technical buddies.

Have a wonderful Monday.

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.