What Will It Take To Move Gold Past $1,300?

The Market Gage - Dillon Gage's Precious Metals Newsletter

For the price of Gold to trade higher, many of the Wall Street Gold traders were calling for a settlement in the Dollar index below the 93.50 area. And that’s exactly what they got and the price of Gold didn’t move. Matter of fact, the Dollar Index traded below the 93.00 level and still no movement in the price. It wasn’t until we had seen the U.S. 10-year Treasury Yield drop from 2.32 percent to 2.27 percent that Gold rallied 5 dollars.

At the moment, the dollar index is trading at 93 and the 10 year U.S. Treasuries are off the lows of 2.2541 percent and now close to 2.27 percent. So the question everyone is asking what will it take for the price of Gold to test the $1,300 dollar level again?

It looks like an uphill battle as we see the equity markets breaking records every day. It seems our market will need some bad economic news or something to happen with North Korea before the equity investor will be willing to take some profits off the table. It will be only then that we will see a rotation out of equities and back into metals.

As the saying goes “the trend is your friend” and until that trend is broken we expect the price of Gold and Silver to be just range bound.

Where have all the traders gone?

In the past I’ve mentioned the Word “algorithms” many times referencing the mechanism used that creates wild price movements in the price of Gold right after some unexpected news hits the wires.

Algorithms are defined as a process or set of rules to be followed in calculations or other problem-solving operations, especially by a computer.

Algorithms are used by many trade houses in order to get a jump on the average investor by being able to execute their trading strategies seconds before anyone else can react to any significant news.

The street is getting so high tech that JPMorgan has developed a first of its kind so called trading robot to execute its trades in its global equities business. Its function is to execute client orders with the maximum speed and efficiency eliminating the human element completely.

If you remember years ago when the business news channels gave you a glimpse of the New York Stock Exchange floor you can see a wall of people trying to conduct their business. Today that’s just not the case as there are just a few folks doing what it took it hundreds of people before to do before. And who if you been around the Gold market for a number of years you must remember the open outcry market on the Commodity Exchange.

I can remember when I worked on Wall street trading Gold and Silver, from the moment I arrived in the office till the end of the trading day, I had a customer in one ear giving me orders to buy or sell Gold and in my other ear the floor broker executing the traders for me. I’m always asked why I speak so fast, I guess I’ve been “programed” (no pun intended) to execute orders on the behalf of my clients at what I hoped at the time was lightning speed. But not even close to the speed and accuracy now offered by electronic trading we have today.

Just think how attractive these new systems are to financial intuitions on Wall Street as these so called robots don’t require any benefits and don t ask for any trading bonuses.

In my 41 years in this business I’m truly amazed how far we have come. From my first trade ticket was that just hand written, timed stamped and at the end of the day confirmed by my trading assistant with the floor broker. To today, where the amount of business that’s executed, confirmed in a millisecond is just amazing.

And now with the Blockchain technology at our door step, even the amount of people needed as a support staff is dramatically reduced.

So we all must embrace this technology as its no doubt here to stay and have a true understanding how it could enhance our business model. Staying ahead of our competition is imperative for a successful future in this business.

Cryptocurrencies anyone?

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.