Wednesday and Thursday, day one and day two after the election, retail equity investors saw what they believed to be buying opportunities in equities that they could not pass up. Based on Trumps’ proposed platform, equity investors gobbled up companies that could pay dividends in the future under the new Trump
administration.
The CME exchange experienced all-time record volumes in the Gold futures contract on Wednesday, trading 800,000 contracts (for one day) after reaching a high of $1,338.30 in the December futures contract Tuesday evening during the election results. Then later on Wednesday, the gold trade was down to the $1,268 area as the equity market gained momentum. Thursday was no different as we seen the December gold contract trade 400,000 times, that’s a lot of action.
Last night Far East selling emerged, putting more pressure on the yellow metal and seeing the December contract trade down to the $1,250 area.
Some Wall Street institutional Gold Traders have reported taking on short positions starting Wednesday and will ride that bias until the equity markets settle down.
Financial advisors I spoke with this morning have indicated that they have seen strong selling in the Gold ETFs overnight. In turn they are cashing in their gold chips for some action in the equity markets.
A stronger dollar index and weaker oil prices haven’t helped the price of gold. Also putting pressure on gold this morning is the increasing odds of a rate hike in December as the CME Rate Watch tool now stands at a 81 percent chance that there will a rate increase at the December FED meeting.
I expect the strong sell off in the price of gold to settle down today, as equities are called to open slightly lower and the excitement in the equity market loses some steam.
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.