Gold Yields to Strong Dollar November 12, 2018 On Friday, news that the UK Transport Minister Jo Johnson had quit over the current Brexit deal, calling it “a terrible mistake,” had an immediate effect on the markets. Both the Sterling and Euro took it on the chin and the U.S. Dollar was the benefactor of the news once again, moving over the 97 figure. Today, we have seen a high of 97.58 in the U.S. Dollar while the Sterling continues its sharp decline, all because of the turmoil over the Brexit deal. Friday, the Dollar also benefited from some tough talk on US-China trade negotiations from White House Trade Adviser Navarro. These two stories were enough to push Gold below its major support level at $1,208.00, a thirty dollar drop in its last three sessions. Later in the day, after the market absorbed the news, things seemed to have settled down as the 10-Year Treasury Yield fell back to the 3.18 level, and the Dollar Index dropped back to 96.87. In response, Gold recovered, trading as high as $1,212, but interestingly enough, it then settled at the $1,208 spot level. There seems to be no stopping the dollar from increasing. It all has to do with the weakness in other world currencies boosting the Dollar which in turn continues to pressure the price of Gold. The holders of long positions strongly believe that the dollar’s recent climb from its 93.81 low to last week’s 97.20 high,(a new 16-month high) is extremely overextended and expect a correction to drive a significant short-covering rally in Gold. I’m sure they would also welcome a declining Equity market to help their cause. We will have to wait and see if that happens and if things can settle down over the Brexit negotiations. The decline in the Euro and the British Sterling is enough to keep the U S Dollar in rally mode. I hope they find some common ground. Until then, Gold has little chance of rallying from here. Friday;s Commitment of Traders Report still shows the Hedge Funds with a massive gross short position at 150k contracts. Many traders believe that the short side of Gold is still a very crowded trade, and that the Gold market is still set up to move higher from a potential heavy short-covering rally. Not one Wall Street trader I spoke with had any concerns that Gold would continue its decline and test the recent $1,160 low at this time. All markets will continue to focus on geopolitical events (especially Brexit developments), comments from the Trump Administration on US-China trade negotiations and potential legal issues, oil prices, and remaining third quarter corporate earnings. We will continue to watch the news that affects the Dollar because the higher the Dollar goes the lower the price of Gold will go. There seems to be no other explanation. 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.