Gold Recovers As Dollar Dips

Market Gage Gold Market Insights

The price of Gold in recovery mode this morning as the Dollar index breaks below the 89 level once again and Global Ten-Year Bond yields are all seen edging lower.

The price of Palladium took on the chin yesterday with the selloff continuing today as the backwardation narrows and some unexpected supplies enter the market. Also Palladium ETF redemptions have accelerated over the last two days and some traders are now seen buying the Platinum/Palladium arb: reversing the strategy that worked well all last year as Palladium was making new historic highs.

In the meantime, support levels in the price of spot Gold are $1,332 and well below that at $1,318. Some FX traders believe a weaker dollar is still in the cards. As for the price of Gold, the Treasury Secretary’s reversing his position on the U.S. Dollar last week really put a torpedo in the most recent Gold rally, but if Wall Street FX traders are correct in calling for a weaker Dollar, this will once again boost the price of Gold. And that’s exactly what we are witnessing today.

The Fed

The Street today awaits comments from the second day of the Fed’s FOMC meeting (to be released at 2 p.m. EST). This will be Chairwoman Yellen’s last meeting before her replacement takes over in February. Most do not expect any policy changes under the new Chairman Jerome Powell. According to the CME FED Watch tool, most expect a 25 basis point increase March meeting and two rate increases after that. This policy is not news and already baked into the market at the Future expectations on higher Gold prices will predicated on the direction of the Dollar and Treasury yields and not on equities unless something unforeseen hits that market.

The Chairwomen leaves her office with an unemployment rate at 4.1 percent, a 17-year low, and an annual GDP at a respectable 2.6 percent. Overall not an exciting tenure, but her legacy will be considered a job well done.

Oh, by the way, the CBOE VIX fear index is now at its highest level since March last year. If you trade equities this is something you want to keep an eye on.

Have a wonderful Wednesday.

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.