Gold Hits 3-Week High on President’s Health Care Comment

The Market Gage - Dillon Gage's Precious Metals Newsletter

Gold yesterday settled close to a 3-week high and was up for the fourth day in a row.

What pushed the up button yesterday were comments made by President Trump after his Town Hall meeting with Conservative Republicans. As President Trump exited the meeting a reporter asked if he believed that he has all the votes needed to pass the Health Care Bill on Thursday, he expressed a not so sure response. At that point stocks headed south falling 237 points for the day and gold rallied double digits. The concern for equity investors is that the chance of a derailment of the Health Care Bill would stall the expected tax cuts, which in turn would slow down the economy and then reduce the chance of further rate hikes.

Case in point: On that news the Dow took a bath yesterday and Gold found some new buying interest.

Looking at the factors that affect the price of gold this morning is a slightly stronger dollar and softer Ten-Year Bond Yields around the globe keeping the price of gold virtually unchanged.

As I indicated in Monday’s comment, the markets seem to be in suspended animation looking for some news to grab onto to give some promise of a future direction in Equities and the price of Gold. Just look at how ONE comment yesterday changed impacted the markets.

As one Wall Street Gold trader put it: “I’m hesitant getting back into the market again, as one tweet from the President can have an adverse effect on the dollar or one comment by a Fed President can have a major impact on the price of Gold. I just can’t take that risk right now. I’d rather wait for things calm down. The question remains when?” This comment gives everyone a good idea of the fear factor in the market. Any unexpected comment from any official can create a market firestorm.

Yes, I think we all can agree that the equity market has had a great run since the election and Gold has held up pretty well with all the negative news of higher interest rates and a stronger dollar. But now with all the squabbling in Washington over Obamacare and future tax cuts; and relatively no movement to speak of (looks like he doesn’t have the votes to pass the bill tomorrow), the markets are now questioning if it is at all possible that a new Health Care Bill and tax cuts (both corporate and individual) can be in place by Aug 31st as the Republicans had promised.

No matter what party you call your own, it appears that this is only the beginning of total gridlock coming down the pike in Washington. Anyone surprised?

You can be sure both party’s futures are hanging on these bills being passed. The country is watching very closely.

Just ahead are billboards that say, watch out for North Korea, Iran and Russia. Going forward, anyone of them could put a land mine in the road totally stopping any Trump agenda.

So, looking at the issues, I for one must question the ability of the equity markets to continue their rally without a quick passage of all the bills that the Republicans had promised. With all that’s going on in Washington one could also take the stance that we probably can expect that Fed Chairwoman Janet Yellen will keep her dovish stance. If that occurs, then gold has a good chance of moving higher. Let’s not forget that just a year ago the Fed Presidents had called for 5 rate hikes and we got one. What do you think will happen to future rate hikes if Washington is out of control? If President Trump’s agenda fails, where will the positive data come from supporting the next rate hike?

If North Korea becomes more of a problem or the investigation starts to show more Russian involvement in our country’s affairs or if anyone of the President Trump’s personal cabinet allies have issues, both houses will have their hands full.

If any or all of this plays out, the financial road to success could be paved with GOLD.

Have a wonderful Wednesday.

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.