The market finds support after last week’s selloff. Neither Le Pens loss in the French Election nor the stronger dollar and higher Ten Year Treasury yields seem to have had a negative impact in the price of gold this morning.
A disappointing loss for the European gold bugs that were rooting for Le Pen to win, as her promise to see France exit the EU was something they were hoping for.
But the European gold bugs have not given up hope just yet. All you have to do is remember the continued bad debt crisis effecting Italy.
Currently there are 58 billion Euro of gross Non-Performing loans from 15 Italian banks. The ECB continues to put pressure on the failing banks to clean up their balance sheets, but it doesn’t seem like they will have the ability to do so. So it looks like the Italian banks will need more capital injections from the ECB to keep them afloat.
Both Spain and Ireland have benefited from government intervention reducing their non-performing loans, but it looks like Italian banks just keep losing ground.
The Financial Times reports today that yields on Greek government debt have hit fresh lows in the aftermath of the French presidential result, as investors’ fears of a Eurozone breakup recede. The Greek 10-year government bond yield dropped to 5.569 per cent today, down more than 13 basis points from last week’s lows and the lowest level since September 2014. Yields fell last week after the country reached a deal with creditors on fiscal and structural reforms in order to unlock bailout cash, paving the way towards debt relief talks. The market for Greek government bonds is relatively small as the vast majority of its debt is held by creditors in the EU and IMF, but shifts in its debt pricing have come to be seen as an indicator of wider market sentiment about the health of the Eurozone.
As previously troubled European countries start to make some headway in putting their houses in order, the European Gold bugs need to look over the pond to Washington where continued bickering on Capitol Hill could lend some support for higher gold prices.
In the meantime, unless we see a strong move to the downside in our equity market here in the states, I believe Gold investors need to be very careful holding on to any long positions.
Have a wonderful Monday.
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.