Textbook technicals take gold to a new high for the year in the April contract to $1,275.90. I must acknowledge my friends who just trade off the gold charts. For the second time this year, they called the breakout at the $1,260 area. That’s the second dinner I owe them after indicating that I only give that trading theory a ten percent reliably. So far they have been right twice this year, so an apology is in order to my technician buddies.
U. S. job creation in February reported at 242,000 which keeps the unemployment rate at 4.9%. Right after the employment number we dropped from $1,260.50 in the April contract to the low so far today at $1250.10. I see that sell off as program trading activity, because within the next eight minutes after the news was absorbed
we witnessed strong buying coming in. These moves indicate to me that program trading is alive and well and in the end fundamentally nothing has changed, as people viewed the sell off as a buying opportunity.
In an attempt to keep the stories about negative interest rates in the forefront, I must refer to someone I admire, Janus Capital’s Bill Gross. In article in today’s Wall Street Journal, Bill Gross says, “negative rates threaten bank profits, as well as any business models, such as those of insurance companies and pension funds that depend upon 7% to 8% annual returns on assets.” He went on to say, “the damage extends to all savers; households worldwide that saved / invested money for college, retirement or for medical bills. They have been damaged and only now are becoming aware of it. Negative rates are an enigma to almost all global investors, undermining the basic architecture of financial markets. But central bankers seem ever intent on going lower, ignorant in my view of the harm being done to a classical economic model that has driven prosperity – until it reached a negative interest rate dead end and could drive no more.”
I wanted to share his comments with each one of you so you can hear from other sources on how damaging negative interest rates could be. These comments only add fuel to the momentum that has been created by ETF purchases from the beginning of the year.
ETF infusions continue to increase and now stand at 56.5 million ounces.
In my opinion the ONLY thing that can derail this gold train going forward is the Fed raising interest rates in March. And for most of us, except for some Wall Street gold traders who are holding on to Fed governor comments, we believe that a rate hike in March is off the table.
So who’s buying a train ticket while the fares are still reasonable?
Have a wonderful weekend.
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.