Gold Pressured as Global Bond Yields Rise

The Market Gage - Gold is Elemental

The price of Gold under pressure as we see Bond yields across the globe higher today.
Our Ten-Year Treasury Bond yield reaches a four-year high at almost 2.73 percent. This will keep the Wall Street Traders out of the Gold market for the time being. We all know they like playing the market from the long side. FOMC Watch tool indicating that there is a 75 percent chance we will see a rate hike in March, which is not sitting well with the Gold investors. The Fed participants are calling for a total of three rate hikes this year but as they always say the hikes will be data dependent. So we will just have to wait and see how things pan out.

Open interest reported Friday morning on Thursdays crazy trading activity declined by almost 25,000 contracts. CME Gold trading volume was incredibly high at almost 700,000 contracts traded . But that number includes spreads as traders roll their positions out of February and into April.

Economic News

It was reported on Friday that the economy grew at an annual rate of 2.6 percent in the fourth quarter of 2017. The number fell short of the President’s prediction of 4 percent. The President was sharing his views at the World Economic Forum in Davos said, “After years of stagnation, the United States is once again experiencing strong economic growth. America is roaring back.”

The economy is growing as indicated by seeing the GDP grow from 1.4 percent in the first quarter last year to 3.1 percent in the second quarter and 3.2 percent in quarter number three.

Many economists say 3 percent is a more realistic number, but it does not take into account the new corporate tax rate and the reduction of individual taxes by most Americans. So four percent annual GDP growth for 2018 is not out of the question.

Comparing the U.S. to other nations, several countries had higher growth rates. The U.S. ranked 5th among the G7 nations with Germany ranking the highest followed by Canada, France and the United Kingdom.

The “BOSS” Is Always Right

Treasury Secretary Steve Mnuchin said Friday that the statement he made last week that shook the Dollar was taken totally out of context. He claims that he isn’t concerned where the U.S. Dollar is trading now, but he believes a strong dollar is better in the long run. Sounds like I heard that somewhere?

The U.S. Currency traders are not the only ones that are not happy with Mnuchin’s comments and have had their say. Beniot Coeure, a member of the executive board of the EBC, said that the dollar slide
is causing jitters in Europe that could impact export-focused companies and jeopardize ECB plans to
reduce monetary stimulus. “Any comments should be shared with multilateral bodies where it belongs,
which is the G-7 and G-20,” he added.

The U.S. Dollar is up against other major currencies today keeping the price of Gold from advancing. One Wall Street Gold trader I spoke with said, “I believe this rally in the dollar will be short lived. It’s just a reaction to the President’s comments, but I’m not ready to buy Gold at these levels. I’ll take a wait see stance before I get back into the market.”

The price of Palladium seems to be in consolidation mode after reaching an all-time high of $1,140 back
on January 15th. Funds continue to reduce their exposure in this market after enjoying a very profitable start to the year.

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.