Gold Up Big AND Dollar Index Positive

What’s happening to our gold market this morning? The dollar index is seen in positive territory and gold is up big. Economics 101 says that’s not supposed to happen. There must be some powerful forces effecting the gold price.

And they are…ETFs. I‘ve been writing a lot about this phenomena in the past few weeks. The gold ETFs are up over 3 million ounces in the last two weeks and up 5.41 pct. on Friday. So I felt it was time to get the pulse of the equity investor.
I have a number of friends who are financial advisors from my old days at Prudential Financial. Now they are spread all over at different firms. After speaking with them this morning there seems to be a few common denominators.

  • It seems that some retail investors have thought very hard about the wild swings in the equity markets. Now some believe that is time to diversify their portfolio.
  • Most don’t understand the physical market and would rather buy ETF shares.
  • Some brokers are recommending investing 10 pct. or more into the gold ETFs.
  • There are a lot of misconceptions about buying precious metals and most financial advisors don’t understand how easy it is to buy physical metals.

Anyway, the average ETF retail investor is usually in this market for the short term and for most, this investment seems to makes sense.
As the gold market continues its rally today and equities decline, I expect we will continue to see more participants enter the ETF arena.

Some retail dealers are reporting two good two way activity. Higher prices have brought some clients in to sell their metal, so a little less demand is seen by the mints and wholesalers as the retail dealers stock up on gold and silver from the secondary market.

CME Silver warehouse stocks continue to see redemptions of 1,000 ounce bars for consumption. On Friday 827,000 ounces were withdrawn from the CME warehouses. JP Morgan Chase took in 310,000 ounces Friday increasing their holdings to almost 44 pct. of all the depositories combined.

Is there a pattern developing here? We will see.

Gold registered warehouse stocks sitting at 159,000 ounces and total combined registered and eligible is 6,515,753 ounces.

One thing I hope doesn’t happen is, to see the market participants start to use the CME warehouse stock inventory to procure metal. If this pattern develops, I expect going forward we will see a direct impact on the price of gold and silver.

Have a wonderful Monday.

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.