Gold UP as Dollar and Treasury Yields Dip.

The Market Gage - Dillon Gage's Precious Metals Newsletter

The price of gold is marching forward as the dollar and treasury yields decline. The Gold ETFs overnight experiencing strong inflows from fund investors. Retail investors still involved in equities, although most of the Precious Metal Dealers I spoke with yesterday said store traffic has picked up over the last few days. A good sign of things to come.

Time to ask my technical friends for their take on the markets. Interesting enough was their comment this morning that they see a “SOFT” resistance level is at $1249 in the February contract then not till $ 1265 where do they see a hard hold at that level. I guess that’s good news that Gold would have more upside potential ahead of it.

They also indicated that $ 18 dollar level in the March futures contract will be a Hard resistance level to break thru, but just expect some consolidation at that level before the next hard level can be obtained at $ 18.32 in the March contract.

Overall, they see the price of gold with a better chance of reaching their levels of resistance.

On Monday, Philadelphia Fed President Patrick Harker said, “an interest rate hike should be on the table at the next Fed meeting in March.”

Now listen to what else he said: “I am still supportive of three rate hikes this year, of course with the major caveat depending on how the economy evolves and policy, fiscal policy evolves.”

Why bother saying this? What changed from the last Fed meeting in January? We all know its “DATA DEPENDENT.” Just look at these two factors. Wage growth has been disappointing and we had an increase in the participation rate. Isn’t that enough info to take a March rate hike off the table?

Obviously, the market doesn’t expect a rate in March as indicated by the latest CME Watch Tool, only predicting a 4 percent chance of a rate hike.

What continues to worry me is that there were times in the past, and I’m sure there will be times in the future, where a Fed president’s comments affect the price of gold. Some comments in the past have moved gold $30 dollars after they were released. The gold market has enough problems deciphering the news without unnecessary comments about future rate hikes. Fed chairwomen Janet Yellen already shared her opinion about future rate hikes. I still believe it’s in the best interest of everyone to just let the Fed minutes speak for themselves and eliminate Fed President’s comments between meetings. It would be more productive to just let the market trade on factual events.

If you remember last year they called for five rate hikes and what happened, one. I see it as no different this year. At the end of the year will this administration win calling for a weaker dollar benefitting exports and the price of gold or will the Fed win executing three rate hikes. I just don’t see how they both can get their way. But with all that’s going on these days, NOTHING is out of the question.

I will be keeping an eye today on both the dollar index and the ten yield treasury yields as I believe these two markets will be the driving force for the price of gold.

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.