Gold Still Positive Despite Dollar

The Market Gage - Dillon Gage's Precious Metals Newsletter

The price of Gold and Silver is in positive territory despite a stronger U.S. Dollar and higher Treasury yields.

The Gold ETF investors seem content with holding on to their long positions, as little if any movement out of those funds has been seen in the last two weeks.

The Federal Reserve

The Fed ends its two-day meeting today with zero chance of raising rates today.

Tomorrow, the President is expected to nominate Jerome Powell a Republican with a background in the Financial Industry. Mr. Powell is viewed as a ‘Dove’ and is a supporter of the current the Chairwoman’s policies. If nominated he would be the first Fed Chair in forty years without a degree in economics.

If the President chooses John Taylor, who is considered a ‘Hawk’ with views of an aggressive Fed policy plan, I believe the Gold market will view this as a negative and sell off after the announcement.

Analyzing the Markets

The Commitments of Traders (COT) reports provide a breakdown of each Tuesday’s open interest for markets with 20 or more traders holding positions equal to or above the reporting levels established by
the CFTC.

The COT released this past Friday still shows traders holding 191,000 long Gold Future contracts. That’s only down 9,000 contracts from when Gold was trading in the $1,295 area to where we were on Monday when I started this report at $1,271. It seems many traders are content with holding on to their positions.

The threat from North Korea and the issues on our shores that are STILL with us (no bills passed on Healthcare, Tax Reform, Corporate tax cuts and infrastructure) seem to give the longs a glimmer of hope that the price of Gold still has some upside potential.

Traders holding Silver positions seem to have the same mindset. According to the most recent report they are still holding a net long position of 65,000 Future contracts.

If you look at the technical numbers I have been reporting on, it’s not until the $1,261 level in Gold and the $16.48 level in Silver where we expect the longs to start to exit the market in larger numbers and accelerate the selloff.

Even though many traders are watching these levels closely, I believe that since all the continued negative news out of Washington and the very high chance of an interest rate hike in December (according to the CME Watch Tool Indicator) is already known in the market, I’ll go out on a limb and predict that the price of Gold will recover and the Traders holding onto their long positions will be right for doing so.

Friday’s close of the CBOE VIX Volatility index (a number which shows the market’s expectation of the next 30-days of volatility ) was showing 9.80 and today the VIX Index is at 9.90 indicating that Equity investors still have no concerns that the Dow Industrials have reached their highs. And if a comprehensive tax bill could be passed there is more expected room to the upside.

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 advisers with respect to these areas. By posting this editorial, you acknowledge, understand and accept this disclaimer.