Gold Reacts To Tax Bill

Gold and Silver Market Insights

Let’s start off with the question of the day. “If you were a CEO of a major corporation and are looking at a tax cut from 35 percent to 20 percent, how would you spend your windfall?”

Would you fire all the help overseas that are currently employed by you who seem to be doing a good job when you are paying them what we would consider poverty wages here in the States and bring those jobs back to the U.S. at healthy competitive wages?

Would you look to hire more people here in the States or would you use the money to invest in technology that would ultimately eliminate jobs here in the States? After all, technology doesn’t require benefits.

Would you use the money to buy back your stock and put more money in the pockets of your executives?

I’ll leave it to you to decide which way they will go…

Now To Our Markets

Putting pressure on the price of Gold this morning is a much higher Dow Industrial Average, a stronger dollar and higher Bond yields around the globe.

If you look up the definition of the word “still” it’s described as not moving or making a sound. This seems to describe the current Gold market to a “t”.

The “forever” level of support in the price of Gold continues to be $1261, and resistance at the $ 1300 level. Anywhere in between is considered range bound.

Silver on the other hand has a $16.12 level of support and a $ 16.48 level of resistance. Silver has been the weaker metal of late, and according to some Wall Street traders, they believe it’s the most vulnerable of the two metals with more down side potential.

Over The Pond

Back on September 29th, IMF Chief, Christine Largarde, gave a speech entitled “Central Banking
and Fintech – A Brave New World” at the Bank of England conference, in which she tackled innovative future trends including cryptocurrency and A.I. (artificial intelligence). She highlighted use case scenarios that the IMF foresees for cryptocurrencies including their potential for fulfilling a “Dollarization 2.0”, meaning that currencies such as Bitcoin could replace the traditional dollar usage in countries facing issues of hyperinflation, such as Venezuela.

She went on to say that it’s not all positive, however she does see the limitations and issues that she imagines cryptocurrencies could face such as Bitcoin with expected extreme volatilities at times and scalability. These criticisms are not new and she does concede that these issues could be ironed out with future development enabling them to meet their potential.

Is this really the future and if she is right, what happens to the world’s reserve currency, the U.S. Dollar?

In order for any currency which includes a cryptocurrency to be a real threat to the U S Dollar , the cryptocurrency would need to be a potential reserve currency . What this means is this cryptocurrency would need to be widely held by central banks around the globe as to pay off international debt obligations. It would also mean that assets such as commodities, including oil and Gold would need to be priced in that particular cryptocurrency and not dollar denominated.

I for one can’t imagine how that can ever happen, BUT at 64 years of age there is a lot surrounding me that I thought could never happen and guess what ? It has…..

The real threat that cryptocurrencies impose on us is the ability for law enforcement to fight drug laundering and the government’s ability to collect taxes on transactions. Now it looks like the IRS is “all in” in trying to get their piece of the action.

I believe once these mirror products are offered by regulated exchanges, the U.S. Government will have no choice, but to put together a powerful new arm of the government to regulate these transactions and collect taxes.

As the saying goes “Never say Never.”

Have a wonderful Monday.

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 advisers with respect to these areas. By posting this editorial, you acknowledge, understand and accept this disclaimer.