Rising Treasury Yields Pressure Gold

The Market Gage - Gold is Elemental

Ten-Year Treasury Yields at 2.96 percent heading for the 3.00 percent level are putting significant pressure on the price of Gold. Gold support levels are at $1,320 and then $1,308. Some Wall Street Gold Traders are looking for Gold to flush out and test the $1,300 dollar level. I disagree, I believe there is enough support between $1,308 and $1,320 to keep the price of Gold afloat.

Nonetheless, with a stronger Dollar and higher Treasury Yields, I expect it would take a significant sell off in the equity market before we would see any new longs enter the precious metals markets.

Without any new investors entering the Silver market I expect Silver to be under more pressure as the price of Gold declines. Don’t forget, there is plenty of above ground stock in Silver keeping it from making new highs for the foreseeable future, unless something totally unexpected happens.

IPMI Conference Highlights

Last week I attended an IPMI (International Precious Metals Institute) three-day seminar that concentrated on the future role of Platinum Group Metals in the Automotive Industry. The event had major representation from the likes of BASF, Johnson Matthey. Umicore and others.

The presentations ranged from the future of different types of transportation, that could use Gold, Silver and PGM Products in their propulsion devices, to the expectation of supply and demand in these products through the year 2025. Here are the groups that were compared:

  • Gas vehicles
  • Diesel vehicles
  • Compressed Natural Gas Vehicles
  • Hybrid vehicles
  • Electric vehicles
  • Plug-in Hybrid vehicles
  • Fuel cell vehicles

There was also a comparison between gas vehicles and hydrogen vehicles.

Different types of batteries to run the vehicles were also presented (and in my opinion, showed no clear winner). The types were:

  • lithium ion
  • Calcium ion
  • Sodium
  • Vanadium
  • Nickel
  • Titanium

There was a retiree from China representing BYD, one of the largest automotive manufacturers in China that produces automobiles, buses, trucks, forklifts and rechargeable batteries. The BYD brand has repeatedly achieved recognition from J.D. Power and Associates for quality.

I heard that in the future, China will be the first country where the majority of the automobiles are electric. What I found interesting was hearing that the Chinese government was all in encouraging car manufactures with incentives to produce more electric vehicles. This left me scratching my head. Why is China so environmentally conscious about producing more electric vehicles when their country is the world’s leader in burning coal for electricity. So as more cars in China charge their batteries, there will be a significant demand on their electric grid causing more coal to be burned to meet the demand. I just don’t understand their logic.

Other topics discussed were catalytic converter recycling and the expected lifespan of different types of batteries and how to dispose of them.

They even had a representative from Con Edison which is responsible for the N.Y. City electric grid. If and when 35 percent of the vehicles on our roads are electric, some electric grids across the country might have a tough time meeting the demand, especially in the summer months.

The future is here and now in this type of technology. It will be interesting to see if it all catches on. That being said, the industry leaders at the conference indicated that industry demand will have little or no effect on futures prices in platinum or palladium.

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.