Treasury Yields Hit Gold

The Market Gage - Dillon Gage's Precious Metals Newsletter

The price of Gold is really taking it on the chin this morning as the yield on the Ten-Year Treasuries breaks thru the 2.30 level. Just a few weeks ago, the yield on the Ten-Year was approaching the 2 percent level. No wonder Gold has been declining with this kind of rally in Treasury yields. Combined with a much stronger dollar, it creates perfect recipe for a much lower Gold price.

Fed chatter once again all over the news the last two days as they attempt to telegraph their agenda on when they expect higher rates to occur.

The only positive segment of our markets has been the interest in the Gold ETF arena. Increases in the funds have occurred in eight out of the last nine days, with over 280,000 ounces added overnight.

Silver feeling the same pain as Gold as some dealers report physical Silver sales are sluggish at best. As the price declines, some dealers are indicating that they are still seeing a good portion of their action in metal returns.

Tax reform is on the minds of all investors as the President is expected to release his plans for tax cuts today.

The threat of eliminating deductions for State and Local taxes have many folks up in arms, especially those in the states with the highest state taxes such as New York, New Jersey, California and Oregon.

I think Treasury Secretary Steve Mnunchin has his own agenda pushing for a 15 percent corporate tax rate that will benefit his friends on Wall Street, making him a hero in their eyes. Remember a stat I shared with you just last week, where I indicated that the CEO’s of large corporations, especially those on Wall Street, are compensated over 206 times more than the average worker? In those types of firms you can be sure that if rates are reduced the disparity will widen significantly. It will be interesting to see what middle class America will be offered in tax reductions or will the breaks just be for the influential in Washington and the top folks on Wall Street?

The Fed

Speaking between meetings once again is New York Fed President William Dudley, stating that the Fed is on track to gradually raise rates. Factors that are depressing inflation seem to be fading and the U S economy’s fundamentals are sound.

“With a firmer import price trend and the fading of effects from a number of temporary, idiosyncratic factors, I expect inflation will rise and stabilize around the Fed’s 2 percent objective over the medium term,” he told students and professors at Onondaga Community College. “In response, the Federal Reserve will likely continue to remove monetary policy accommodation gradually.”

These comments between meetings are totally unnecessary and serve no purpose, other than to keep a lid on the price of gold. Nothing has or will change between Fed meetings, so what’s the point of giving your opinion? Possibly you are trying to talk your way out of the corner you put yourself in by taking on a policy of being totally transparent. The Fed is so sure that a 2 percent target rate will be achieved that they were willing to put their predictions out for all the world to see. So when that figure fell short of expectations, there were some Hawkish Fed members looking to lower the bar in order to raise rates sooner than later.

Current CME Fed Watch tool numbers reveal a 81 percent chance of a rate hike at the December meeting up from 70 percent just two days ago and up from 21 percent just a few weeks ago before their chatter began. No question this has added fuel to the decline in the Gold price.

Artificial Intelligence

Are you a college student or a parent of a college student with hopes of a fruitful career when you graduate? Well you just better be sure you take the right courses and position yourself to be a marketable candidate when you graduate. Here’s why.

Bridgewater Associates founder Ray Dalio said Friday that almost half of the jobs in the next two decades will be replaced by Artificial Intelligence. “By in large, the world is going to largely consist of people who can take language and put it into code, which then allows the computer to operate like a brain or people who are going to be displaced by that,” Dalio told Fox News.

In “The Market Gage” you will see us referring to Algorithms, which are programs used by Wall Street firms to replace traders. In the future, these applications will affect all industries and many predict that in the next twenty years, 40 percent of all jobs are going to be replaced by these algorithms in various forms.

Dalio, the founder of the largest hedge fund, said that coding, as an educational area and subsequent career path, will help bridge the gap of widespread job losses. “Everybody has to learn to code. It’s like not knowing how to read and write in the new age,” he said.

If you have been reading our blog, you’ll know that we have been introducing to you all the new technology including, Algorithms, Cryptocurrencies, and Blockchain Technology, along with what makes these new ideas so important. These are not future programs to be developed, they are here now and being used by many large banks and corporations.

According to Dalio, firms not willing to implement this new technology will be left behind the curve because they will be unable to compete and their employees will lack the skills for further advancement.

So, even going further in a practical form, all you will need going out the door is a cell phone and a handkerchief. The cell phone will start your car, open the door of your home, and conduct all your former cash transactions.

I think I’m getting too old for this stuff. I can’t find a pencil with an eraser anywhere.

Have a wonderful Wednesday.

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 advisers with respect to these areas. By posting this editorial, you acknowledge, understand and accept this disclaimer.