Making a case for a continued rally in the price of Gold.
If I can compare two numbers that might be of interest, you only need to go back to Oct 16th to see a pattern emerging.
On this date, the low in the dollar index was 94.78, and the low in the price of spot Gold was $ 1223.00.
Since then the dollar index is up two percent and if this was a so called normal market, one can make the argument that the price of gold should be “down two percent.” After all, the price of Gold is traded in dollar terms.
Since then, both the dollar index and the price of Gold has edged higher. Looking at a chart, the incline has been more profound in the dollar index which should have caused a selloff in the price of Gold.
Interestingly, the price of Gold has rallied since that day.
The question now on my mind is there starting to be a disconnect on the dollar index and the Gold price? Are the continued geopolitical risk and significant stock market volatility taking a toll on Global
equities? Are the continued trade wars a factor?
Also, in a normal market, higher interest rates should have put significant pressure on the price of Gold and that just hasn’t happened.
Are you starting to see a pattern emerging?
As I have been indicating over the last two months, the smart money seems to be using a “dollar cost averaging approach” to enter the Gold market and they are already being rewarded.
Going forward, there is so much out there that can fuel a continued rally in the price of Gold.
Here are a few things to consider, in no particular order:
- The midterm Elections
- Runaway government spending
- Stock market volatility
- Entitlements not being addressed
- Lowering bond yields
- Geopolitical risks
And how many issues of the Commitment of Traders report have you now seen showing huge short positions posted, a report not necessarily in the news each week.
I’m running out of paper…
So I hope I have given you some food for thought and something to share with your clients.
I look forward to the days ahead.
Enjoy the rest of your day.
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.