Bank of Japan Disappoints The Market

The Market Gage - Dillon Gage's Precious Metals Newsletter

Bank of Japan disappoints the market this morning after announcing it has eased its monetary policy by increasing its purchases of exchange traded funds, but left interest rates unchanged.

This news turned out to be a non-event mover for the price of gold. As I start to write this report this morning, we see the price of gold virtually unchanged, at the so called technical tight rope at the $1,332 level.

This level represents a fork in the road, as the short term direction in the price of gold will determine where the price of gold settles today. The price of gold has the potential to trend higher as the market consolidates and builds a base. The majority of the traders I spoke with this morning believe that in the short term the price of gold will be elevated because they believe for the most part that the Fed will not raise rates anytime soon.

Weaker dollar this morning is boosting the price of gold as inflows continue into the ETF arena but at a slower pace.

As I was in the process of writing my report this morning, the Gross Domestic product numbers were released. GDP numbers indicate the U.S. economy grew far less than expected in the second quarter giving the price of gold a boost. This is seen weakening the hand of the FED further as raising rates anytime this year will be very difficult. As soon as the GDP number was released we witnessed the dollar weaken further and the price of gold rally ten dollars quickly as program trading kicked in on the news.

So as it looks now, the next level of resistance the market has to contend with will be at $1,348 in the August contract. Once the program trade buying is finished after the release of the GDP report, I expect the market to weaken a little and settle in a trading range again but at a higher level.

To be an informed investor or trader it is important to monitor all the news that effects the price of gold. Case in point: When I first started to prepare my report this morning Aug. Gold was trading in a quiet session at $1,332 and by the time I was finished Aug. Gold became very active and was trading at $1,346.

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