Gold in Recovery Mode This Morning

The Market Gage - Dillon Gage's Precious Metals Newsletter

The price of Gold in recovery mode this morning despite a stronger dollar and higher treasury yields.

Some Wall Street Gold traders on Wednesday put on short positions as the price of gold broke thru the 200 day moving average at $1,250.80. As I indicated in the past, their strategy is to make a profit of fifteen to twenty dollars and get out. And that’s exactly what they did as soon as we broke thru the strong support level of at $1,232.00.

Now onto economic and political headlines from Europe.

On Sunday, we have the French runoff election to see who will be the next President of France. According to the most recent polls, Ms. Le Pen trails her rival Mr. Macron by 20 points.

Some say she’s no Donald Trump and her chances are slim, but a light turn out could help her cause and no one knows for sure
what the outcome will be.

If Mr. Macron does win the election, it better be by a significant margin to help him in the general election in June. The smaller the margin the harder it will be for him to get his agenda in place in the French Parliament. No different than
here in the states, a majority is needed on his side to enact his policies.

Nonetheless, the gold market has already written off Ms. Len Pen and assumed that France will stay on as one of the pillars of the European Union.

If by any slim chance she wins Sunday, watch out all markets Sunday night.

Back to our side of the pond:

All the sound bites and headlines on every news channel about the Healthcare Bill is starting to give everyone a migraine. Now that the House has passed the Health Care bill, the Senate gets a go at it next. This is not the end. One must watch how the insurers react to the final bill. After all, Washington can pass any bill it wants, but the bottom line will always be does this plan work well for the insurance companies and their shareholders? You can be sure if the bill doesn’t fit the insurers book they just will not play in that State or make it so expensive with high deductibles that no one will be able to afford it. I guess there is much more to come.

We all are told that the equity markets look six months out when predicting future earnings and market trends. But what happens to the Equity market in six months when it realizes we don’t have a significant tax relief plan in place? Some talking heads on the business news channels predict a 15 percent correction or 3000 points. That would put us almost back to the Dow levels on election night last November.

So where would that put the price of gold? If my recollection is correct, it was just about 18 months ago when most of the Sovereign Mints were on allocation and refineries had delays of 30 days or more, finding product to meet your customer orders was extremely difficult. If you see a correction of this magnitude, buckle up because history just might repeat itself.

Fed news

On Wednesday, the Fed decided to leave rates unchanged. The committees comments gave gold a sell bias as they claimed that the first quarter GDP is seem by them as “transitory.” Before the Fed decision the odds of a rate hike in June stood at 64 percent. Since their comments, the chance of a rate hike now stands at 78.5 percent.

Food for thought

Social media, the Internet, 24-hour global news service…how much news can the average person absorb? And how does any one
news service create enough news content to keep us glued to the TV screen 24/7? I can only imagine that millions of Americans
must be going to bed either angry or worried what might happen tomorrow. I remember going to bed with a smile on my face after
watching the Honeymooners or listening to Johnny Carson’s monologue. It was a different world back then. Since I am one of those addicts that can’t get enough news, it has been taking a lot longer to fall asleep every evening. How about you?

Have a wonderful Friday.

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.