Gold Under Pressure from a Stronger Dollar Index

The Market Gage - Dillon Gage's Precious Metals Newsletter

The onslaught of negative news continues to put pressure on the metals this morning. The stronger dollar index now over 102. Stronger yields in the U.S. ten-year treasuries also hurting Gold. So much so that ten-year bond yields around the globe in countries such as Germany, France and Italy, all are showing a good increase in their 10-year bond yields.

Now that the 50-day and 100-day moving average has been violated, some Wall Street gold traders have indicated that they will take on a short position in gold and silver. They are now looking for the selloff to accelerate with hopes that the $1,200 dollar level in gold and the $17.00 dollar level
will be tested some time soon. These guys typically don’t like to hold a position too long unless the momentum is in their favor. If this market reverses they will cover in a heartbeat.

For those who enjoy statistics, take the most recent low in the price of gold reported on December 3, 2015 at $1,046 and the most recent high at $1,375 reported on July 6, 2016 and that gives you a 50 percent retracement level of $1,210.50 spot. For the technical traders and for the algorithm programs, a settlement today below that figure will give you a sell signal at that level.

One small shining light is in the ETF arena, where gold inflows were seen overnight and overall the recent outflows have not been overwhelming.

Just a week away from the next Fed decision on interest rates, and now with the odds at 88.6 percent chance, a 25 basis rate increase will be upon us in short order. What has been scaring most longs in the Gold market are the odds of another rate hike in June at 45 percent and seemingly that the expectation of the odds going higher in the weeks to come.

Let’s not forget next Wednesday is the Dutch election, which depending on the outcome can have an effect on the gold price in a positive way.

The financial advisors I spoke with still indicate the retail investors are “all in” the equity
markets. They have fielded more questions of late, but most are staying put hoping for the market to have another leg up in prices.

Overall a very interesting market and with all the fighting going on in Washington, one cannot be sure
of any market outcome in the future.

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