This morning, a stronger dollar and higher 10-year bond yields are keeping the price of gold locked in a trading range. With the dollar index back over the 100 level this morning, its keeping gold from rallying thru the two key resistance levels in the February contract that were broken thru yesterday at $ 1,220 and $ 1,226.
Inflows in the Gold ETFs last couple of days seem to be fund related. None of the financial advisors I spoke with this morning indicated that there was any retail interest in investing in ETFs at this time.
In Wednesday’s comment I spoke about the possible breakup of the European Union. It’s time we look in our own backyard at the new policies being introduced by the Trump administration. By no means is it my intent to make this a political comment, just the opposite. I want to present this administration’s plan and let you decide if you believe the country is headed in the right direction.
Here’s my “Jobs” vs. “The cost of goods and services” – Cause and Effect analysis.
Let me list some of the things the President has on his agenda.
- Cause: Asking, (I’m being polite) large corporations to bring manufacturing jobs back to America or create new opportunities for the American worker.
- Effect: Lower unemployment, higher cost of products for American consumer.
- Cause: Withdrawing from NAFTA. Imposing tariffs on Mexico and Canada to import their products.
- Effect: Higher costs of goods for the American consumer.
- Cause: Trade sanctions with China. Imposing import tariffs.
- Effect: Higher cost of goods for the American consumer.
- Cause: Higher minimum wage here in America.
- Effect: More much needed disposable income for the lower middleclass. But would this in turn put some small businesses out of business? And would this force big business to look to go high tech to eliminate these jobs?
- Cause: Tax cuts, both corporate and individual.
- Effect: No matter how you look at this, this plan will turn into an expenditure in the beginning with the hope of growth in the economy increasing disposable income and eventually making this plan “ revenue neutral“?
- Cause: The much fought over plan to revamp Obama Care. There are numbers all over the place on the cost of replacing Obama Care. It’s not worth my time trying to figure out how expensive this overhaul will be. I just don’t have a clue, but for sure it won’t be cheap.
- Effect: Many Americans having the possibility of having no health care and adding to the countries debt in a big way.
- Cause: The much needed infrastructure plan to repair our countries highway and bridges.
- Effect: Some estimate this can cost the American tax payer over 1 trillion dollars.
I can go on and on with these proposals, but one must not forget the costs of entitlements facing our nation with the increasing costs of Social Security, Medicare and Medicaid. No one in Washington would even talk about these issues, but they do increase the country’s debt year after year.
As I said in the beginning of this comment, I’ll leave it up to you to decide if this is the right path for our nation.
So in the end where do we go from here and what shape will the U.S. economy be in four years from now? For that matter let’s look at where the price of gold will be trading a year from now based on all that’s proposed.
My Answer: “HIGHER”.
Have a wonderful Friday.
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.