At time of this report, the price Gold is the only metal in negative territory as it is under pressure as the U.S. Dollar gets a boost from the weakness in the China Yuan. China’s currency has fallen over 9 percent in the past 6 months and is trading near a decade low.
A former IMF China division chief, Eswar Prasad, told Bloomberg News, “A further depreciation of the yuan relative to the dollar would soften the blow of U.S. tariffs but at the considerable risk of triggering substantial capital outflows.” The Yuan continues to be dragged down by trade tensions with the U.S. and bets of further monetary easing by the People’s Bank of China
Also, the yield spread between our Ten Year Government bond and China’s Ten year government bond came in to 37 basis points this month, the lowest since April 2011. That makes their currency denominated assets less attractive, and reduces their capital inflows.
In other words, anytime that there is a considerable decline in a world currency, the U S Dollar will be the beneficiary and in turn make the price of Gold more expensive on the world stage. This I believe why we see the price of Gold the only metal in the red this morning.
A rebounding Equity market can only help keep the price of Gold under wraps and keep the spot price in a trading range between $1,215 and $1,235.
For the most part, we expect the price of Silver to follow instructions from the yellow metal.
The price of Palladium in a world of its own, as tightening supplies continue, now seeing a EFP to December at minus 16 minus 12.
Have a wonderful Monday.
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.