Gold selling off this morning after the market absorbs a few Fed President’s comments that they are seriously considering raising rates at the next Fed meeting in March.
New York Fed President William Dudley, who is called by some “Janet Yellen’s right hand man,” indicated yesterday that “the case for monetary tightening has become more compelling.” All four Fed presidents who spoke Tuesday indicated that they will consider raising rates at the next Fed meeting.
The price of gold sold off and the action overnight in the far east followed suit. The market is starting to really believe a rate hike will happen in March as indicated by the CME Watch Tool predictor. Yesterday before the Fed Presidents started speaking the chance of a 25 basis point rate in March was only 36 percent. Looking at the CME Watch Tool this morning the possibility of a 25 basis rate hike in March now has jumped up to almost 69 percent.
The price of gold is getting pressure from all sides this morning as we see a stronger dollar index and higher yields in the U.S. ten-year treasury.
The Gold ETF funds still experiencing inflows overnight, but what I find most interesting is that the Wall Street gold traders I spoke with are not playing the gold market from the short side as they usually do on negative news. One guy told me the market has so many conflicting signs that the prudent approach is to stay on the sidelines at this time.
My take is: with all this negative news in the gold market, higher interest rates record Dow closes almost every day the price of gold has been resilient. Remember at the start of the year when spot gold was trading at $1,148? At the time of this report, gold is now at $1,240. That’s a 7.5 percent increase in just 60 days. Not a bad return at all.
For you folks who don’t DAY trade the Gold and Silver market and want to take a long term view on future price movements please read my report below, Where are all the jobs REALLY going?
Where are all the jobs going? If you now go to any major airport and look for a waitress or waiter to serve you, you will be hard pressed to find one. This is corporate America’s pushback to a higher minimum wage. Even Wendy’s and McDonald’s are preparing a tablet so that you can input your order electronically. There are now some fast food restaurants in the airport that don’t take cash. Sure you will find one person working ten tablet locations explaining to old folks (like yours truly) how to operate the pad. So waitress and waiters are being replaced by 1 or 2 runners as they are called.
So you are probably asking yourself, ok that’s interesting, but what does this have to do with the price of gold?
So let’s look at this from two different directions. If you are on welfare and live in one of the following states, your benefits are equal to over $20 dollars an hour.
- Hawaii
- DC
- Mass.
- Conn.
- N.Y.
- N.J.
- Rhode Island
- Vermont
Is there any incentive to find a job as everyone is calling for $15 dollars per hour? These are enormous costs for each state every year and only seem to be increasing. So one can say that welfare is the highest paying entry level in each state. Don’t get me wrong, my heart goes out to the less fortunate and I truly understand that there are folks out there that have no other choice. I get that.
Just a year ago a report came out that said the highest welfare package was in Hawaii at $49,175 and the lowest is in Mississippi at $16,984. I don’t have the latest figures, but one must believe it didn’t go down.
The point I’m trying to make is that what will these entitlement costs be in the future for each state and will these kiosks bring an uptick to the unemployment lines?
Entitlements…us old folks (baby boomers) are retiring at a pace of 2 million per year. Tax cuts you say both corporate and individual “yea” , sounds wonderful. Don’t forget Social Security, Medicare, and Medicaid. These are enormous costs that need to be addressed.
Here are some eye-opening figures at the time of this report:
- United States National Debt Almost 20 trillion dollars.
- European Community 9,844,043,958,813 Euro Public Debt.
- The next debt clock will take a minute to read: 69,537,110,039,471: Sixty nine trillion, five hundred thirty seven billion, one hundred ten million, thirty nine thousand, four hundred seventy one dollars. THAT IS THE WORLDS DEBT.
Anyone want to venture a plan to pay this off? I’m all ears…
How in the world can the Federal Board of governors even talk about raising interest rates? Will corporate tax cuts help create jobs or just fill the already fat bellies of corporate America? Will cutting individual taxes help stimulate the economy?
There is no doubt we must repair our country’s infrastructure, how much will that cost?
Costs, costs and costs.
When and if this all comes to a head I’ll probably not be around, but one thing is for sure we CANNOT leave these problems for future generations, it’s just not the right thing to do. Unfortunately, I don’t have an answer. And the sad part is, I don’t think anyone else does either.
For the long term investor Gold has not lost any of its luster.
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.