Gold and Silver Rally Continues Driven By ETF Demand

The Market Gage - Dillon Gage's Precious Metals Newsletter

The rally continues driven by a number of factors. First and foremost is the daily increase in the ETF funds. Gold ETFs today posting a new high for 2016, holding almost 67 million ounces. Silver ETF holdings are at 641 million ounces, just shy of the high in early June when it reached 643 million ounces.

What I find significant and interesting is the reported physical demand for gold out of the UK. Gold is up 40 percent in Pound Sterling terms and prior to the Brexit vote, UK firms have reported strong physical demand. What is unusual, and I hope becomes a pattern here in the States, is who is jumping into the physical gold market. Historically the average investor has been a male over 50 years of age. Recently In the United Kingdom, the major investors have been young and a good number have been women.

Another significant factor in both the gold and silver markets is the reported all time high long spec positions. Some Wall Street gold traders have shared with me this morning their concerns that historically, with these reported positions, the markets are primed for a major selloff. However, every indication we see this morning is that the rally seems to be alive and well and continuing, even without Far East and India demand, as those markets for many reasons are not involved at all in the physical market at this time.

Federal Reserve minutes to be released this afternoon 2pm EDT. I expect we will hear how concerned the FED board was over the Brexit vote and what impact they expected it to have on the world markets. Chairwomen Ms. Yellen commented that the Brexit vote was a factor in leaving rates unchanged here in the States.

Just some other noteworthy points:

  • The World Gold Council reported Central Bank gold purchasing was almost 110 tonnes in the first quarter this year with the largest buyers being Russia and China.
  • A third of global government bonds are now trading at a negative yield giving gold a boost as investors see the yellow metal as a good investment and a must have as part of a balanced portfolio.

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.