Gold Hangs Tough Despite Firm Dollar

Gold and Silver Market Insights

First quarter GDP comes in at 2.3 percent. In turn, the U.S. Dollar firmed up at 91.99, taking out the past Jan 12th high. Given where the dollar index is trading, I’m surprised the price of gold is not taking out yesterday’s lows.

The Wall Street Gold traders I spoke with this morning said they believe there is good support in the price of Gold between $1,308 and $1,315 and don’t expect to test the $1308 level anytime soon. On the other hand, it seems they don’t have the confidence they had in the past three months where they were trading the range between $1,320
and $1,350.

Is Silver a Precious Metal or an industrial Metal?

First let’s look at the industrial side of the debate.

Silver is used in the manufacture of solar panels, electronics, batteries, automobiles, glass products, water purification, defoggers, photographs, cutlery, mirrors, and even in NASA spacecraft.

Silver is also a recognized growth inhibitor for bacteria and viruses, and it can catalyze the production of new cells (for wound and bone healing) and the regeneration of lost skin. Our twenty-first-century society is built on technology, and an increasing percentage of that technology runs on silver. In our growing techno generation, silver is becoming more and more valuable.

With all these industrial and technological uses, why isn’t the price of silver much higher than the 16-to-17 dollar area we see it in today?

I believe the main reason is the abundance of above-ground stocks, caused by the lack of demand as an investment product. Over the last few years, refiners have been delivering their bars to the exchange instead of to the producers to make coins and bars of all sorts.

One just has to look at the CME Warehouse holdings of 1000 ounce bars sitting at 261 million ounces. When there was investment demand, warehouse stocks stood at 112 million ounces.

For the past year, some sovereign mints have been stockpiling blanks just in case there is a need for them once again. I’m sure they would rather melt down blanks instead of melting down coins they have already produced.

So for the time being, Silver has only an industrial mark and has lost its precious metal status. All you have to do is look at the U.S. Silver Eagle Mint sales of the last few years.

From its record setting sale of 47 million ounces in 2015 to a projected 14 million
this year, the U.S. Mint sales have been declining at a record pace.

The question remains, when will this change? You see I left out the word “IF.”

All the industrial uses and all the advancements in technology that find uses for silver will give the price of Silver a base. Sure there is a lot of material in the warehouses and in the secondary market to filter thru.

I believe that as the economy slows down in the second half of this year due to higher interest rates, corporate CEOs put their hands back in their pockets to save the tax windfalls for a rainy day and consumer debt continues to grow, both gold and especially the poor man’s precious metal (silver) will once be back in favor again.

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.