It’s a little after 3 am on the east coast as I start my comment today, because I have to leave early this morning on business and will be driving, so I will be unable to share my thoughts unless I start them now.
Nonetheless, after speaking to a few gold traders yesterday, and listening to the collective opinions of them all, they indicate that the gold market selloff was an overreaction to the comments made by some Fed governors at the Fed meeting in April.
The day before the minutes were released, the odds of a June rate hike were at 4 pct. probability. Yesterday it was around 24 pct. as reported by Bloomberg news.
As I indicated in my comment on Wednesday, with ANY hint of a rate hike, I expect a strong sell off in the yellow metal. And that’s exactly what happened. Perception became reality in a heartbeat. But looking back at that decline in the price of gold and silver, I must agree with the Wall Street traders that this was just a knee jerk reaction and there is no basis at this point to believe that a June rate hike is a sure thing.
Remember the GDP number a few weeks ago from the first quarter reported at 0.5 percent? A weak number at best.
What about all the retailers other than Walmart reporting weak financial results? A report came out earlier in the week that inflation picked up and was reported at 0.4 percent. Does this one number give the Feds the ammunition to raise rates in June?
Remember who running the show at the FED. The FED chairwoman has always said that any rate hike will always be DATA dependent.
So yes, we lost some momentum, but negative rates didn’t go away over in Europe and the Far East, and the migrant crisis in Europe has not improved, so what has changed? NOTHING. A very smart friend and trader, (who I happen to admire) said earlier in the week
that the gold market needs two things for the bull market to sustain itself, a settlement over $1,300 dollars and strong physical demand. Get those two things and we are off to the races.
I finally got the other eye opened. I hope you enjoyed the comment today.
Good night, or shall I say, have a wonderful Friday.
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.