Weaker Dollar Continues To Boost Gold

The Market Gage - Dillon Gage's Precious Metals Newsletter

A continued weaker dollar is giving gold a boost this morning. Overnight, good physical silver buying has emerged in the Far East as tensions with North Korea continue to be on the minds of most in that region.

Chinese President Xi has indicated that he will spend 78 billion for infrastructure projects, helping prop up the value of metals across the board.

Strong inflows continue in the Platinum ETF as investors and commodity funds seem to have a new found interest in the PGM arena.

Turning to the EU – now that the French Presidential Election is over and most European investors are feeling better about their currency as we saw last week with a $6bn flow into European stock funds. Earnings growth in Europe have been better than here in the States so some traders have seen a rotation out of metals and into equities since the French Election. One gold dealer said, “My sales have dried up since the French Election and the only action I have is some folks coming thru the door selling some products they bought a short time ago.”

Also a shining light in the Eurozone has been the report of manufacturing hitting a 6-year high in April. The biggest participants have been France, Germany and Italy. Greece still seems to be struggling as they reported falling output for the eighth month in a row. So it looks like idle money will flow where the action is and it seems this is just what the EU community needed after all the gloom and doom it has experienced since the migrant crisis.

On our shores – U.S. Stock Funds saw their second week of outflows, redeeming almost $2.4 billion dollars, and have been exiting these products since March at a combined total of over $20 billion dollars. The question I have, is this the start of a rotation out of U.S. Equities and into hard assets? It’s too early to tell if this pattern will continue, but don’t you think the smart money sees what’s going on in Washington and is starting to protect their gains since the election?

Friday’s data on U.S. inflation and retail sales in April came in weaker than expected, softening the dollar. Buying emerged in the 10-Year treasuries giving gold and silver a boost.

After the disappointing economic data was released on Friday, the odds of a rate hike in June according
to the FOMC Fed Watch rate tool dropped from 83 percent to 72 percent.

A few months ago I thought that if there was going to be a rally in the precious metals markets it would be started from across the pond. Now it looks like the any rally will be initiated from actions here in Washington and possibly the Far East.

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.