Slow Inflation and Low Retails Sales Lift Precious Metals

The Market Gage - Dillon Gage's Precious Metals Newsletter

The price of gold and silver in rally mode this morning after disappointing economic data was released. The Consumer Price Index was unchanged in June, putting a damper on the FED’s ability to raise rates any time soon. Retail Sales Report was down 0.2 percent when the street was expecting a positive number.

Also handcuffing the Fed are the inflation figures that were released this morning, that indicated the rate of nflation slowed in June to 1.6 percent, down from 1.9 percent the month prior.

After the news was released this morning, the U.S. dollar lost ground and the Ten-Year
Treasury yields took it on the chin, trading down to 2.2832 percent from 2.39 just a few days ago. Both these moves are bullish for precious metals.

Wall Street gold traders are applauding the news, but have not yet committed to the long side as the Currency markets and the Oil market have been giving them more bang for their buck. One trader I spoke to this morning said, “I would like to see gold settle above the $1,232 level. This would confirm to me that the market isn’t just buying on the news and could have the ability to trade higher from here.”

In Other News:

Blockchain technology, the future of the Precious Metals Industry and the Banking Industry? It’s at our doorstep. Are you ready?

Let’s define a Blockchain as a database that is used to maintain a continuously growing list of records called blocks. Each block contains a time stamp and a product or currency and linked to a previous block. Blockchains are resistant to modification of data.

In the Precious Metals arena, Blockchain technology can be used as an electronic trading platform giving its users the ability to hedge physical metal products as allocated or unallocated. The platform can also be used for just inventory. Maintaining records for every bit of inventory held in a depository giving the participants in the program the ability to buy and sell physical products and settle dollars within minutes.

In our industry, the Blockchain chip can represent let’s say a 1000 ounce bar held in IDS Delaware. That chip can be bought and sold over and over again on the Blockchain network and cash settled in seconds. Currently, there are private as well as exchange programs
soon to be released and without a doubt the future is right in front of our eyes. A trader looking for product will no longer have to pick up the phone and ask the dealer if he has 1000 ounce bars for sale at a particular location. All he or she will have to do is plug into the Blockchain network, type in the product and location and everyone participating in the program offering product will be listed.

You lock the trade, dollars settle within minutes and the depository is notified electronically that you are the new owner. If you want to take delivery just contact the depository, pay the appropriate out fees and collect you metal.

On a Blockchain trading platform. soon to be introduced by the CME and Britain’s Royal Mint, you will have the ability to buy and sell physical gold digitally in one gram quantities and stored electronically in the Royal Mints Vault. Up to $1 billion worth of RMGs will be issued initially by the Royal Mint to get the program started. We are hoping for a release later this year.

Blockchain, which first emerged as the technology powering cryptocurrency bitcoin, is seen by financial institution as a powerful new tool to increase transparency and reduce the costs and complexity of a wide range of financial transactions. Even on the equity side
Post-trade provider the Depository Trust & Clearing Corp (DTCC) said in January that it would use Blockchain technology this year to rebuild its platform that processes $11 trillion worth of credit default swaps.

To give you a better understanding of how the Blockchain program is already working, let’s now talk about a Blockchain program that’s called “Bitcoin.”

For those not familiar with this technology, Bitcoin is a cryptic or Digital currency, if you will, which is to compete with the world banking industry.

In a report released yesterday in the Financial Times, Bitcoin was described as a cryptic currency designed to disrupt the banking industry. Now FT claims Bitcoin is facing a existential crisis. Everyone told you that Bitcoin was an indestructible payment system but now the report reveals it might be flawed. Bitcoin was designed to be limited to 21 million coins and no single institution can control the Bitcoin network.

FT goes on to say that for Bitcoin to survive, it might need some decisive leadership. As it stands, Bitcoin operates through a shared public ledger called the Blockchain. Think of it as a type of library, but one held in every computer in the network. Within that library, every book represents a data block limited in size usually filled with transactions. Importantly only those who solve a specific mathematical puzzle, one derived from all the books already in the library, have permission to add a new book to the shelf. These puzzle solvers are called miners and they get an award every time they add a new entry.

This has been their primary source of revenue. The problem now is, there are more transactions in space in these blocks or books. If Bitcoin gets more popular, this problem can cause a speed limit on how quickly these transactions can be processed. That means miners would have to charge more for priority access. To scale effectively, even new third party will have to be introduced to processed transactions outside the Blockchain or the limits will have to be removed allowing for ever bigger blocks.

Over the next few months, miners will vote on which software to implement. Option “A” Bitcoin Core or option “B” Bitcoin unlimited. If it’s ever going to be business friendly, this political flaw needs to be resolved. What happens next is anyone guess. All we know
is that billions of dollars of Bitcoin value can be at stake in the event there is no decisive agreement.

In my opinion, if I am investing in a Blockchain product, I would only want to participate in an exchange-regulated or Government-offered product where I feel my investment is safe and secure.

We at Dillon Gage are committed to investigating ALL the future Precious Metal Blockchain products that will be available to our clients and the precious metals investor.
We are dedicated to keeping our clients informed about what we believe is a safe and trustworthy product with financial support and regulation, so that in the future, you can have a level of confidence that your product is safe and secure.

That’s the reason we will be actively involved in all Exchange Regulated / Government Blockchain products from the initial design to the end product release so that our clients will be ahead of the curve in this ever-changing world of technology.

Have a wonderful Friday.