Gold Hangs Tight On Fed Comments

San Francisco Fed President John Williams said the Federal Reserve should raise rates three times this year as the already strong economy will get a boost from tax cuts. He went on to say, “I believe we are in a pretty good situation, the economy is doing great, everyone expects us to raise rates gradually…and if the data changes we can respond to that. I’m not worried about inflation taking off.”

Our Markets

For once a Fed President’s comments seem to have no effect on the price of Gold this morning.

The market is looking at a stronger dollar index at 92.34 up from the lows last week of 91.75 a figure that most currency traders expect to hold, and lower bond yields across the globe.

So to start off the week we see a Gold market just content of staying in a tight range for the time being.

If you ever wondered about the physical Silver market and wanted to Gage how well the manufacturing aspect was doing, all you have to do is watch the CME Warehouse inventory numbers.

Going back to June 2016, the total CME Warehouse holdings for Silver, both eligible and non-eligible categories, totaled 149 million ounces.

total CME Warehouse

As of this past Friday the CME Warehouse totals were at 246 million ounces. (Click the chart to enlarge for details) Just the first notice day in this past December a significant amount of silver was issued at the exchange.

So what that tells us was that the reason for the increase of almost 100 million ounces in the past year and a half was that no one wanted the metal. So dealers utilized the exchange
to sell their bars. Normally, when one thousand ounce bars are in demand, as in the need to make product, the dealers would ignore the exchange and offer the bars at hefty premiums to the market. So when there is almost no demand for the bars, the dealers and refiners have no other choice, but to issue the bars on the exchange, turning those bars into cash. In the end, they will give up trying to get a premium and just cover their short position on the exchange.

Since for the most part, the price of Silver really doesn’t move like the price of Gold does when the U.S. Dollar or Treasury yields move, the only way to really get a pulse on the Silver market is to watch the one thousand premium offers and follow the warehouse stock numbers. That way, for the most part, you will have a true picture of where the price of Silver is headed in the days to come.

Have a wonderful Monday.

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.