Strong Dollar Pressures Gold and Silver

The Market Gage - Dillon Gage's Precious Metals Newsletter

A strong dollar and extensive outflows in the gold and silver ETFs overnight are putting continued pressure on the price of gold and silver.

The dollar index hitting the 100 figure overnight is bringing gold down to its knees at a major support level at $1,212 in the December contract.

The combination of a very strong dollar and higher real interest rates will continue to put a sell bias in the precious metals arena.

On Friday, Federal Reserve Vice Chairman Stanley Fisher indicated, that the FED is ready to raise rates in December as the Fed’s numbers on inflation and job growth are very close to meeting their objectives.

The CME Fed watch tool indicates the chance of a rate hike in December is at 85.8 percent. The concern I have, since a December rate hike is almost a given, is how many more rate hikes will be put into place in 2017?

I have to give some press to my technical friends this morning, as they have stood by me all year with great analysis, they say gold must hold $1,212 in the December contract, then there will be some support, but not much, at the $1,206 level. If that level gets violated it’s off to the races. They claim after that, the next level to watch for will be $ 1178.

Silver is in the same boat, maybe a little more vulnerable, with weak support levels at $ 16.90, $ 16.58 and again at $ 16.45.

The financial advisors I spoke with this morning indicated that they have seen a complete reversal of the so-called “have to have a balanced portfolio” mentality to a “find me the best stocks that will flourish during the next four years under the Trump administration” mentality. Quite a change after the record levels seen in the ETF holdings this year.

Retail physical redemptions have gained momentum and some dealers indicated that they will be reducing bids for certain products as carrying costs are expected to increase in the short term and some breathing room is needed to carry that inventory.

Have a wonderful Monday.

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.