SPECIAL EDITION – Weak Dollar Boosts Gold

The Market Gage - Dillon Gage's Precious Metals Newsletter

Weaker dollar and softer 10 year treasury yields gives the price of Gold a boost this morning. At the time of this report February gold was trading just shy of $ 1180 up over $ 14.00 dollars on the day.

As I indicated yesterday, I expected to see for the first time in a long time inflows into the gold ETF and that’s exactly what occurred. So for my friends who I bet a cup of coffee that I would be correct please don’t send me any Dunkin Donut cards. To tell you the truth I’m not really a fan of coffee at all. I just wanted to get some feedback from my readers.

My technical friends are back in full swing and started the year on the right track informing us yesterday that they had seen no immediate resistance levels to speak of and expected gold to rally from yesterday’s levels. Today they expect some resistance in February gold at the $ 1182 level then nothing till $ 1195 in the February contract.

One person asked me yesterday why do we use the most active futures February contract as a level of support and resistance? Most folks use the price of spot gold as an indicator. If you use the current EFP levels one can equate the spot level to the futures. My chart friends prefer the most active futures month for their analysis. Today’s gold EFP level is -40 -60 as an indication.

The Wall Street gold traders I spoke with this morning inform me they have for the most part flattened out their positions and are poised to sell into any strong rally in the yellow metal as they still believe interest rates will continue to rise. Once again I’ll take the other side of that trade and call for a weaker dollar and softer bond yields giving the support the longs will be looking for.

For those who closely follow the CME Watch tool for future interest rate hikes here are the current odds for rake hikes at each Fed meeting.

Feb: 2 percent
Mar: 19 percent
May 29.5 percent
Jun: 48.5 percent
Jul: 45 percent
Sep 38.6 percent
Nov. 34.4 percent
Dec. 23.7 percent

As we can see at the current time there is no month in 2017 with a percentage rate of over 49 percent.

One must expect a fierce battle between the Republicans and Democrats on any proposal put on the table by the Trump
administration. And one would also hope that there could be peace on Capitol Hill. Both parties are still acting like children with President Elect Trump calling Chuck Schumer a clown this morning and Schumer calling the plan to repeal Obamacare “Make America Sick Again.”

In the meantime I expect that with the absence of news this will catapult the dollar to new heights and continued madness by both parties gold will slowly react to no new rate hikes in the cards and head to higher ground.

Now I could still hear my mother saying, “now boys play nice.”

Have a wonderful Thursday.

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, 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.