Gold Lagging On Ten-Year Bond Yields and Strong Dollar

The Market Gage - Dillon Gage's Precious Metals Newsletter

The dollar index approaching the 101 level this morning along with higher Ten-Year Bond Yields putting Gold in negative territory.

Some Wall Street Gold traders I spoke with this morning indicated that they expect gold to be under some pressure for the time being, as the equity market continues to set new records every day. But they also indicated that they view this pullback as a buying opportunity as they believe gold still has more room on the upside.

What I find interesting is the continued investment into the Gold ETFs by what I’m being told are large players and very little if any retail investor interest. Is that where the smart money is going?

Yesterday’s news on the President’s tax plan really put a torpedo in the side of gold as we broke thru the $1,228 level of support. The price of silver holding up much better, NOT approaching its level of support at $ 17.48.

As I indicated in yesterday’s Flash Gage, I expected the $1,228 support level to hold in the February Gold contract and we saw the overnight low get down to the $1,222 level. I still believe we will settle above that number today and head higher again now that the tax news has been absorbed into the marketplace.

All eyes over the pond are still watching Italy’s banking crisis. An interesting story in the Wall Street Journal this morning indicates that the Italian banking system is still having problems even after the government stepped in and set up a 20 billion Euro reserve fund to help Banca Monte Dei Paschi stay solvent. Italy’s banking system is still sitting on toxic
loans of over 200 billion Euros and doesn’t seem to have a plan to solve the problem other than throw money at it. I see this as “ground zero” for the problems facing the European Union that will come to a head in the near future and that’s when I expect the real rally in the gold market will begin.

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.