Precious Metals Holding Their Support Levels

The Market Gage - Dillon Gage's Precious Metals Newsletter

Precious metals prices seem to be consolidating at levels that hold their support levels.

Meanwhile, Moody’s downgraded China’s rating from A1 to A3 yesterday on worries of slower economic growth and growing debt. Some investors there saw this as an opportunity to diversify their holdings into Gold and Silver helping support both metals at these levels. Moody expects government debt to rise toward 40 percent of GDP by 2018.

Still some Wall Street gold traders I spoke with said at this point they prefer to be a little short, rather than a little long as they see no real catalyst in the market place that can move the prices significantly higher from here.

The Fed:

Today at 2pm, the Federal Reserve will be releasing the minutes from their last closed door meeting. Currently, the market is expecting another rate hike at the next Fed meeting in June. What they should be more concerned with is how to unwind the balance sheet and not worry too much about raising rates. Some traders see this release of information as old news as changes to the economy have occurred changing some of the Fed Presidents’ opinions since the last meeting. Chicago Fed President Charles Evens said just a week ago that he still views greater risk in inflation running too low, rather than too high. Nonetheless, we will be listening to what was said to see if it has any impact on the markets.

Bond prices and the price of Gold.

Softer yields on U.S. Treasuries have given the price of gold a boost. JP Morgan and Goldman Sachs indicated that they have lowered their expectations for higher bonds yields this year as the President’s agenda has hit unexpected road blocks and adjustments which in turn could slow down the economy. On Monday, the price of Gold reached a three week high. Since then the dollar gained some strength causing the price of gold to head in the other direction.

Over the pond:

Greece’s potential financial crisis is not over yet as creditors failed to reach a deal on debt relief. Talks broke down on Monday after seven hours of negotiations with Germany and the IMF officials. The July deadline is fast approaching as Greece is in need of a 86 billion Euro bailout to meet its obligations. As a result, Greek two-year bond prices jumped 25.4 basis points to reach 5.4 percent, their highest level in over a month. Before Germany agrees to any bailout, Greece must guarantee that the negotiated tax, pension and labor reforms will be put in place.

China and U.S. investments:

In a report issued by the U.S. Treasury Department on Monday, we find that in the month of March China bought 28 billon dollars’ worth of U.S. Treasuries. China is still not America’s largest creditor, Japan has that title. Overall, offshore investors bought almost 60 billion dollars worth of U.S. Treasuries in March. This might explain President Trump softening his rhetoric towards North Korea. How so you say? One must believe that before any action is taken on North Korea, our President should have the approval of China’s president Xi. Neither country wants to jeopardize the trade and investment relationships they enjoy today. As we all know, it all boils down to money.

Have a wonderful Wednesday.

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.