Oil prices rally over three percent over night, highest levels since November 2018, giving precious metal investors an indication that inflation is gearing up.
All four metals seen in positive territory as equity prices are expected to open in negative territory. Still the Dow is only one percent away from the historic highs it reached this past October.
Also helping the price of Gold early Monday morning is the Dollar Index which had overnight lows trading at $97.32.
Surprisingly, this comes off a two-week high reached on Friday. I expect the dollar to strengthen later in the day as oil prices continue to reach new highs. This is after a report that U.S. Secretary of State Mike Pompeo is expected to announce that as of May 2, the State Department will no
longer grant sanctions waivers to any country that is currently importing Iranian crude.
Over the long run, higher oil prices should erode consumer confidence in the economy and could put pressure on equity prices. This could give the price of Gold a boost.
Another story that caught my attention last week that might explain why the price of Gold has been under pressure, is a report released last week from Bloomberg news that Venezuela sold about $400 million in gold despite a growing international push to freeze the country’s assets, according to two people with knowledge of the matter.
The amount, which would equal almost 9 tons, was reflected by a drop in the bank’s total reserves, which fell to $8.6 billion on April 12, according to data provided by the central bank. About $5.1 billion of that is gold.
The sale could mean President Nicolas Maduro has found a way to skirt the economic blockade. Maduro has blown through reserves, selling gold to firms in the United Arab Emirates and Turkey, as sanctions increasingly cut off his authoritarian regime from the global financial system.
The drop in total reserves could also mean the bank is writing off gold it can no longer access, including some of the $ 1.2 billion stored in the Bank of England. The bank has denied the government’s requests to
repatriate it.
Have a wonderful Monday.
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.