We are just a few days away from the most important Presidential election this country has ever experienced. So who is better for the price of gold, Hillary or Donald?
This past Friday when it was announced that the FBI had reopened the case regarding Hilary’s e-mails, gold jumped up and equities sold off. Some have said this is an indication on where gold will head if Trump wins. However, one news release doesn’t set the course for future activity. Besides, I will not pick sides in the upcoming election. When I first started back in the gold business in 1976, my boss gave me this advice, “If you want to be successful in this business, there are three things you never talk about with a client: politics, food and religion. You never want to alienate a client.” I believe this was great advice that I still try to follow today.
There is so much news on so many fronts of this presidential election that no one can predict the effect on any market at this time. The most compelling news outside this election is the Federal Reserve interest rate decision coming up in December. Historically with a rate hike increase on the table one would expect the price of gold to be under some pressure. This time, it’s not the case.
My take is that a 25 basis point rate hike is in the market already and with negative interest still all over the globe, this December’s hike will be just like last December’s, “a one and done increase.” Even if the data does not support a rate hike, I believe the Fed will be pressured by the media and Wall Street to stop the madness and get this over with. In the event the Fed does nothing, I believe two things will happen: first the Fed will lose all credibility and second, gold will rally off that news.
No one knows what can happen, especially in the next few days before the election and in the months after. What I do expect, with all this madness, we will experience a very volatile news-driven market in the days before the election AND in months after (depending on the outcome).
We’ve had a feast day for Wall Street gold traders, who have been screaming for some action, and that is just what we have experienced over the last two days.
Today we view all four metals in the ETF basket of precious metals showing a strong increase and a sign of continued portfolio diversification by the retail investor. Overnight, gold broke thru the $1,300 dollar level in the December contract and at the time of this report it is just below that level. Forgetting what is going on in the race for the White House, the real catalyst fueling the price of gold and silver is the weak dollar. Just a week ago, the dollar index was pushing the 99 handle, today we hit a low of 97.25, a significant move to the downside in just a couple of days.
It seems for the time being that the gold market is shrugging off the worries of a rate increase in December. There is only a 7 percent chance that the Feds will
raise rates today, as all eyes will be on the December meeting where the odds are at a 73 percent chance that rate will increase after that meeting.
Remember the old Wendy’s hamburger commercial where the elderly lady looks at her hamburger and asks, “Where’s the beef?” That inspires my question for the Fed. Where’s the data justifying a rate hike? I’m looking at the horizon and I see nothing to substantiate a rate hike at this time.
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 advisors with respect to these areas. By posting this editorial, you acknowledge, understand and accept this disclaimer.