Italy’s Election Gives Gold A Bump

We start the week looking at a mixed bag of financial data: stronger dollar, softer Ten-Year Treasury yields and a lower CBOE VIX Volatility index. So it’s no surprise that the price of Gold is virtually unchanged this morning.

Overnight, the price of Gold got a boost out of Europe as it was reported that the Italian election results were in kind of limbo status. In other words, Italy is now left in political turmoil as no party received enough votes to rule alone. But as we started to trade Gold here in the states, selling emerged and brought the price of Gold back to unchanged for the overnight trading session.

The result will upset European leaders who feared that Italy’s anti-establishment parties would convince other far right movements in France and Germany to continue their quest for new support in an attempt to over throw the status quo.

Steeling Ourselves for What’s Next

Conservative Republican Lawmakers are opposing the President’s plan of proposing steep tariffs on Aluminum and Steel imports. They go on to say his plan will hurt American businesses and spark an international trade war.

On the other side of the argument is Commerce Secretary Wilbur Ross, seen holding up a can of Campbell’s soup claiming the president’s plan is “no big deal.” He claims that there are about 2.6 cents worth of steel in each can.

You can be sure if the President gets his way, the cost of imposing these tariffs will be passed on to the consumer resulting in higher prices.

The world is up in arms over his plan. Even our friends like the Canadian Foreign minister said, these tariffs are “totally unacceptable” and promises retaliation if Trump goes thru with his plan.

Obviously his plan isn’t sitting too well with equity markets either. I don’t need to tell you how those markets are reacting, it’s not good.

So with all this madness, who should benefit from his plan?

Let’s hear from Paul Tudor Jones, a famous Hedge fund manager. Some of you must remember him? He’s the guy who made a name for himself when he called the October 1987 Stock market crash.

As reported by CNBC on Friday, he said, “I think the recent tax cuts and spending increases are something we will all look back on and regret…Together they will give us a budget deficit of 5% of GDP. Unprecedented in peacetime outside of recessions. This reminds me of the late 1960s when we experimented with low rates and fiscal stimulus to keep the economy at full employment and fund the Vietnam War.
We are setting the stage for accelerating inflation, just as we did in the late ’60s.”

To trade in such an environment, the hedge-fund manager recommended investors stay in cash or buy commodities and “hard assets.” He gave a “conservative” 3.75 percent year-end target for the U.S. 10-year treasury yield.

Going forward, without listening to all the rhetoric in the news, let’s just focus on the value of the U.S. Dollar, the Ten-year and the CBOE VIX Index. The action in these three markets will tell us all we need to know about where the price of Gold is headed.

Has our time arrived?

What’s your take?

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.