Yesterday, North Korea launched its second missile in less than a month and created panic buying in Gold from the Far East. Air raid sirens could be heard all over Japan as a North Korean ballistic missile flew over head and landed in the Pacific ocean.
Within six minutes of North Korea launching their missile, South Korea responded with a launch of their own sending Kim Jung Un the message, “we can play the same game.”
An emergency UN Security council meeting will be held today in New York hoping to get Russia and China’s help in finding a diplomatic solution. Most think that will not work but it’s worth a try, illustrating that the US prefers a diplomatic solution over starting World War three. Unfortunately, the latest UN Sanctions seem to be having no effect on the aggressive behavior of Kim Jung Un.
Most believe the US will only retaliate if we, or our allies, are attacked, but one can be sure that this can’t go on forever, allowing North Korea to build up their nuclear capabilities.
Now that the market has absorbed the news, the price of gold has retreated back to the levels before the missile launch. A mixed bag of indicators this morning are keeping the price of gold locked in. A weaker dollar could always help the longs, but stronger Treasury Yields have been the main catalyst in the decline of the price of gold in the past few weeks, trading in the Ten Year from 2.01 to 2.21.
A good barometer of what investors are thinking here in the States is the CBOE Volatility Index which is currently at 10.65, indicating that all is well, even as investors discount the North Korean threat and the escalating debt here in the States. I have to believe that eventually the blinders have to come off at some point and profit taking has to emerge. But for the time being, investors don’t care about anything except cheering the Dow as it reaches new highs.
Back in the office today after attending Gold/Platinum week here in NY with my colleagues from the home office in Texas. All day meetings for all attendees it seemed, breakfasts, lunches and the two gala events, the CME and IPMI dinner attracted a sold out crowd for both events.
One topic that was mentioned quite often at our meetings and at the dinners was the surprisingly low premiums in Sovereign Mint products approaching levels so low that some are considering melting these products. Seems like a crazy idea to me, but with all the buying by dealers of late, some can’t continue to carry these items and prefer just to melt them and get it over with.
As one Sovereign Mint employee put it, you can hear a pin drop in the manufacturing division; all we need are flowers and you would experience the same level of noise that one would expect at a funeral. I had to make a face after that comment but it goes to show how saturated the secondary market is in gold coins and bars.
The smart money is lowering their bids further and getting rid of any products that won’t move in the event this market heats up for whatever reason.
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.