Gold Still Locked In Range

Gold Still Locked In Range

Despite a strong rally in U.S. Treasury yields the last couple of days, the price of Gold still locked in trading range ($1,180 to $1,210).

The continued trade dispute between China and the U.S. remains a key issue with both administrations adding more tariffs on products trying to see will cry uncle first.

September job numbers came in at a disappointing number (134,000) this morning with no market reaction in either equities or commodities.

Shake Ups To Watch For

Things to watch for in the coming months that can have a profound effect on the markets.

  • Interest rates: One of the ways that the Federal Reserve can control the growth in the U S economy is through interest rate increases. These monetary policy changes can matter greatly to financial institutions and consumers because it effects the rates for, mortgages, credit cards, student loans and savings accounts.It is very likely will see a fourth rate hike in December this year. The Feds will be keeping a close eye on things like the inflation rate, the unemployment rate and the stock market to get a sense of where the economy is. A strong economy will force the FOMC to continue to raise rates in an attempt to pump the brakes on economic growth before things get out of hand.

    Most recently, they have been keeping interest rates low trying to stimulate the economy. Thanks to the corporate tax cuts and regulation changes, the economy got a boost, but when the economy grows too fast, something the Feds are concerned with, it can overheat and create the sort of bubbles and subsequent crashes that we experienced in 2008.

    Currently, it seems that the Fed is trying to stay ahead of the curve by aggressively raising rates, but there will come a point in time where the higher rates will have an impact on the average consumer.

    No one knows for sure that at a “close to full employment number” or “higher wages” will offset higher interest rates. But historically, higher interest rates have forced consumers eventually to put their hands in their pockets and stop spending. Let’s not forget that the most recent household debt figures show household debt at over 13 trillion dollars, an “all-time high”. And with the Feds continuing their aggressive stance it can only get worse. At that point one can expect federal tax revenues to diminish and put the country in further debt.

    And one thing no one wants to talk about is the runaway cost for healthcare. Currently, to cover a family of four it costs employers $ 20,000 dollars. The higher the rate the less likely employers will be willing to have adds to staff.

  • Midterm elections: It seems to me that we have possibly reached the mountain top on the economy. What will cause the equity markets to reverse course could be an unexpected outcome in the midterm elections. In our history, we have never seen a country
    so divided. I don’t think there is anyone out there that would dispute that. In the event the Democrats get control of either branch of government, one could expect a defined rejection of anything the President puts forward.If that happens, I expect a selloff in equities and a rally in the price of Gold. I don’t remember the last time I’ve seen the Gold market participants this short. I will be watching the polls and the action in the Equity markets a few days before the midterms to get an indication of what’s to come. With a Gold market this short, a strong rally in the price of the yellow metal is not out of the question.

What do you think? One thing I expect, that if the market starts a short covering rally the Wall Street Gold traders, who have been absent for the longest time, will be riding that surf hoping to create a bigger wave to the upside.

Have a wonderful Friday.

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.