Gold Rebounds Despite Stronger Dollar

The Market Gage - Dillon Gage's Precious Metals Newsletter

The price of gold rebounds from its technical support level of $1,212 that it hit on Monday. (Actual low in the December contract was $1,211.) Kudos to my tech friends who virtually nailed the support level in gold.

Both the stronger dollar index and the across the board sell off in the precious metal ETFs seems to have no effect on the price of gold this morning.

Precious metal retailers are reporting steady buying by their clients. The significant sell off in the price of gold since the election has not stopped interest in the physical arena.

Financial advisors still reporting ETF redemptions for opportunities in the equity markets.

I find it extremely encouraging for our markets as we see a strong dollar and a strong sell off in the ETFS virtually having no negative impact in the gold price.

CME WATCH TOOL indicator for a possible rate hike in December now stands at 91 percent.

St. Louis President James Bullard said in a speech today, “A single policy rate increase, possibly in December, may be sufficient to move monetary policy to a neutral setting.” Will we see a repeat of last year’s one and done rate hike? That story, in my opinion has given gold the bid bias it enjoys this morning.

As I reported Monday, silver still seems most vulnerable. A decent rebound off the second technical support level at $ 16.58 (December low was $16.62) was met and rebounded, but lack of physical demand for metal in Europe will keep the pressure on the price.

If the dollar strengths further and we see more ETF redemptions, I expect gold to experience downside pressure. At this time, there doesn’t seem to be any real positive news to sustain this rally. As I said in my Monday comment, I think it needs to be repeated, according to my technical gurus, if the $1,212 level and the $1,206 levels in December gold are violated, watch out below.

Have a wonderful Wednesday.

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.