Softer Dollar Boosts Gold

Softer Dollar Boosts Gold

Recovering Treasury Yields and a slightly softer Dollar are giving the price of Gold a boost this morning.

Wall Street Gold traders, for the most part, seem to be pleased with their investment after going long when the spot price of Gold broke thru the $1,232 level earlier in the week. That level now becomes the support level in the event the market turns around. But at this point it looks like the price of gold has a strong foundation at these levels and should remain in a bullish mode the rest of the year.

No one knows what to make of the Equity markets after watching a 700 point swing yesterday.

What I don’t understand is with interest around the world extremely low, how can our Federal Reserve even consider raising rates any further? At this point I believe they already overshot the proper rate that makes sense.

That comment leads to my feature story today.

Ball of Confusion – Are We Or Aren’t We?

On Tuesday, in a Marketwatch article, New York Fed President John Williams said, “The U.S. economy will stay strong in 2019 and inflation will move up above 2% and so the U.S. Central Bank should continue to raise interest rates gradually. Given this outlook of strong growth, strong labor market and inflation near our goal and taking account all the various risks around the outlook, I do expect further gradual increases in interest rates will best sponsor a sustained economic expansion.”

The article goes on to report that the Fed’s last policy statement used the word “strong” five times in describing the U.S. economy, he noted. “It accurately represents where we are,” he said. The New York Fed President said growth will slow in 2019, but only a bit, to a 2.5% annual rate from near 3% this year as the Trump tax cut will continue to provide a “tailwind” to activity.

Ok now, before I go on. I must make an appointment with a hearing specialist, because just a few days ago I thought I heard the Fed Chairman say we are close to neutral, indicating a dovish position on future rate hikes. And now the New York Fed President is taking a hawkish stance?

Then yesterday, Federal Reserve officials said they are considering whether to signal a new wait-and-see approach after a likely interest-rate increase at their meeting in December.

So, which is it?

These kind of comments between Fed meetings just drive traders and investors crazy. These comments also cause crazy swings of volatility and move markets in unpredictable ways.

Also on Monday, the Equity Markets were cheering the President’s accomplishments at the G20 meeting with President Xi. Tuesday stocks dropped on fears of an economic slowdown. One must remember what the President said before the meeting with President Xi, “I’m very happy now with the current trade tariffs.”

Just leaving the ten percent tariffs in place will cause an economic slowdown here in the states, as you can be sure the costs will be passed on to the consumer.

Ball of confusion comments:

  • “The Fed has more rate hikes planned.”
  • “We are close to neutral.”
  • “Great meeting with President Xi. We got a lot accomplished.”
  • “If we don’t get a deal in 90 days, we are going with the 25 percent tariffs.”

Where is my migraine medication?

For those who are old enough to remember the Abbott and Costello skit “Who’s on first?” this modern day rhetoric surely beats out that confusing explanation.

With this level of uncertainty, I expect both the Bond market and the price of Gold to benefit from such madness. Time will tell if Equity investors get “fed up” (no pun intended) with all this talk, take their profits off the table and head into safer investments. Looks like Tuesday and Thursday’s Equity activity was just a start.

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.