Gold Pauses As Dollar Ticks Up

The Market Gage - Dillon Gage's Precious Metals Newsletter

The price of gold under some pressure this morning as both the dollar and Ten-Year Treasury yields are seen in positive territory. Recent previous declines in both markets have been giving the price of gold a boost, but today’s reversal just seems to be a pause in the action as we expect the decline in the dollar and softer Ten
Year Treasury yields to continue.

As such, I expect the price of gold will continue to head higher, as a two-step forward, one-step back improvement in the price. I believe the next level of resistance is the $1,295 range. If we can trade through that level, I expect an obvious speed bump at the $1,300 dollar level. Following this scenario, I expect no resistance until the previous high, back on election night (Nov. 8) last year is reached at the $1,338 level.

ETF gold funds continue to see inflows into their programs, and the CME Fed Watch Tool is at a high chance of an expected rate increase at the next Fed meeting next week standing at a 93.5 percent.

Across the pond

Tomorrow the UK holds its 2017 general election for a new government. On April 18th, Prime Minister Theresa May called for a snap election on June 8th. At that point, she was expecting to take advantage of her opponent’s weakness in hopes of obtaining a larger majority for her party to better negotiate the UK’s exit from the European Union.

But now everything seems to have backfired on her, as the polls predict that the Prime Minister’s plan might be in trouble. Since she called for a snap election she has slipped in the polls almost 18 percent and now leads in some polls by only 1 percent. She has been criticized for not having adequate policing after austerity and policy cuts. With nearly two trillion in debt and repeat terrorist attacks, many are calling for a change.

By the way, the snap election was approved by parliament 522 to 13.

Right after the election there is expected to be an arm wrestle of negotiations between the UK and continental European Leaders on the steps to their first level of talks on the UK’s exit. Talks are expected to start the week of June 19th.

No doubt the terrorist attacks will have an effect on how the people vote. So tomorrow we wait to see how this pans out.

Back to our shores

All eyes tomorrow will focus on former FBI Director Jim Comey’s testimony. Mr. Comey is scheduled to testify before the Senate Intelligence Committee and all the major TV networks are planning to air it live.

Obviously, if any bombshells come out of the Comey testimony that effects the equity markets, one could expect possible fireworks in the Gold market. We should be watching with one eye on the testimony and the other on market reaction.

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.