Price Of Gold Takes A Pause

Price of Gold takes a pause

The price of Gold takes a pause today after dropping almost 3 percent this week. The price of Silver experienced a 5 percent decline and PGMs also took it on the chin as Platinum declined 6 percent and Palladium fell over 5 percent.

So far this year, PGMs combined are down 18 percent and Silver is down 14 percent, while the price of Gold holding up the best, only showing a 10 percent decline.

ETF investors have redeemed over 15 tons of Gold since the beginning of the month, cashing in 33 tons in July and 57 tons in June.

So where do we go from here?

After the price of Gold declined to almost $1,160 yesterday due to Chinese Central Bank selling, only to reverse itself after the selling stopped, rallying on short covering to $1,182, we now look at indicators to where the market can go from here.

Wall Street Gold traders who just use technical factors to trade, are claiming that the market is extremely oversold, pointing to the 14-day Relative Strength Index (RSI) that is currently at 19.1, a number this low hasn’t been seen in over 3 years.

Also, traders who are holding long positions, point out Friday’s Commitment of Traders Report (COT) that showed an historically low Net Fund Long Position of 12k contracts, which hasn’t been this low since December, 2015. They also point out the growing gross short position that is at 196,000 which also indicates that the price of Gold is way oversold, setting up the potential for a strong move to the upside.

So, without any significant news that might move the needle, we look to the U.S. Dollar for guidance.

Some currency traders believe that the dollar’s rally is coming to an end as geopolitical risks calm down a bit, so they expect a meaningful correction in the dollar in the days ahead. They point out that the dollar is up 9.90% since its 88.25 low on February 14th and they feel it has probably topped out at these levels. Any significant decline in the U.S. Dollar should bring a short-covering rally in the price of Gold.

So all eyes will be fixed on the Dollar Index to hopefully give us a direction in the next move of the price of Gold.

Have a wonderful Friday.

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.