U.S. Dollar’s Rise Whacks Gold

The Market Gage - Dillon Gage's Precious Metals Newsletter

The movement in the value of the U.S. Dollar this morning is orchestrating the movement in the price of gold. As the dollar index reached new highs overnight at 101.37, strong selling emerged violating both support levels bringing gold down to the $1,201.30 level in the December contract.

The price of Gold is now at a 6-month low.

As I watch the activity in the currency markets this morning, it seems that there is a direct negative correlation between the dollar and the price of gold.

This morning, as European Central Bank President Draghi was speaking, the Euro strengthened and the dollar retreated a bit bringing the price of gold back to its previous support level at $1,212.00, where is sits as I write. The longs thank you for your comments Pres. Draghi.

Yesterday, U.S. Federal Reserve Chair Janet Yellen said that interest rates could rise “relatively soon.” Sounds like she is putting in a hedge on her stance for a December rate hike. Can someone out there define in actual time for me the definition of “relatively soon” or for that matter can anyone define “soon” in relation to time or days?

Sounds like my kids excuse for not doing something. “Dad, I’ll get to that, soon.”

So as she hedges with her statement “soon”, might not that be in December? Today’s CME Watch tool gives a December rate hike a 91 percent chance of happening. All the markets are expecting a hike in December. If she doesn’t deliver, I expect the market will react violently to the news.

Sixth day in a row we see outflow in both the gold and silver ETF holdings. These redemptions
continue to depress the gold and silver prices. The combination of the stronger dollar and the ETF redemptions are making it very difficult for gold and silver to sustain a rally.

I do expect this sell off to create interest in the physical arena, as dealers scramble to position themselves with the most profitable products for yearend and we all know what kind of activity to expect for Mint products in early January. Believe it or not, it’s right around the corner.

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.