Lower Dollar Boosts Gold

The Market Gage - Dillon Gage's Precious Metals Newsletter

The price of gold up this morning as the U.S. Dollar and Treasury yields are seen lower this morning.

Even though the Gold EFF is a not as big as the futures market the inflow continues ten out of the last eleven days. There seems to be investors out there that are dead set on adding Gold to their portfolios.

On Wednesday, the price of Palladium hit price parity with Platinum for the first time since 2001. Platinum is more heavily used in diesel engines and since the Volkswagen rigging emissions scandal, the demand for Palladium has increased as more car companies turn away from diesel engines, to gas and hybrid electric engines.

Tax Reform

Let’s look at the known versus the unknown

Where do I start? Whatever tax bill Congress passes will shape the financial future of this great nation for years to come.

Let’s look at the line-up and what’s at stake.

We’ll start with what’s on the line for the Republicans and the President. The President has been in office for almost nine months now while the Republicans have dominated both houses for the same time period, but all they have accomplished was to put a conservative justice on the Supreme Court.

Healthcare, tax reform, infrastructure, all on the minds of all Americans and its hard to believe that with the Republicans in charge, nothing has been accomplished. It’s crunch time for the Republicans, because if the most popular bill that all Americans demand doesn’t get done you can say goodbye to many sitting Senators and Representatives.

The President needs a win in the worst way and, calling it like I see it, one can be sure the Democrats will do everything in their power to make sure he strikes out. But this is a dangerous game the Democrats are playing, because if it above all other bills fail, both parties will be judged by how Tax Reform plays out.

I’m sure many of you would like the opportunity to arm wrestle me on this topic, but I’m not convinced that both a corporate tax reduction and an individual tax reduction is necessary. Before you pick up the phone to scream at me let me defend myself.

First, since the financial crisis almost a decade ago, we have seen a significant rally in equities, so much so that we have seen new records set over 40 times this year alone. Also the Fed seems to be trying to lower the bar on their inflation target in order to justify a rate hike at the December meeting. It seems as if they think the economy is strong enough to raise rates one more time this year and predict many more to come in the years ahead. Have you looked at your investments and your 401 accounts to see how well you are doing? So my question remains, and I don’t expect everyone to agree, why do we need to cut the corporate tax rate from 35 percent to 15 percent? I hear some of you saying, we need to repatriate dollars from overseas to bring jobs and hard currencies back to our shores.

Do you believe that corporations will change their tactics and not continue to look for the cheapest labor around the globe in order to enhance their bottom lines? We all know technology has given them that option and I expect no matter what pressure the President puts on them they will not budge.

So Mr. Treasury Secretary, do you believe a corporate rate cut will bring thousands of jobs to the U.S? Or just pad the pockets of corporate executives, some of your friends that you rubbed shoulders with at your previous employer?

So maybe we should scrap corporate tax reform and spend the “dollars we don’t really have” to spend on a middle class tax cut for the ones who really need it. After all, whatever tax cut that’s put into place initially will increase the country’s debt. I’m sure many economists will tell you any tax cut for either
corporate or individual will not reduce our country’s debt until years from now, in the meantime that debt will rise exponentially.

Let’s not even talk about healthcare and infrastructure, the huge cost of both those bills are a topic for another day.

Looking at what’s being proposed, the White House has indicated that a family of four making $100,000 dollars will see their tax obligation be reduced by $1,000 dollars. WOW! Let me go out and buy a Mercedes instead of a Toyota. That’s $20 dollars a week. Can’t even fill my gas tank, never mind paying off my historic individual debt.

Are they kidding? This is the historic tax cut middle America has been waiting for? And they are dead set on reducing the corporate rate to 20 percent. So once again, Wall Street executives win big and middle America gets to buy an extra small bag of chips to put in their lunch boxes.

Without making this blog into a long story, I give my apologies to those who don’t agree. It’s just one man’s opinion and food for debate if nothing else. It would be nice if this tax bill could help the less fortunate in this country, tightening the gap between the haves and have nots, and eventually giving those who are the most in need a chance to live healthy lives by passing a healthcare bill everyone can afford.

In the meantime I must say, because I’m in the Gold business and I like to debate the future of the price of Gold, I for one expect that if tax reform fails, equity investors will be heading for the exits and an expected rotation out of equities will occur with the Gold market being the beneficiary of such a move.

I’m sure this tax bill will be highly contested, especially when the estimated cost for this tax plan will increase the country’s debt by “OVER 5 TRILLON DOLLARS”.

Sounds like a huge cost to give a big $ 1,000 tax cut to the average American.

Have a wonderful Friday.

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