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Gold Takes Two-Fisted Knockout Punch

Gold Takes Two-Fisted Knockout Punch
Category: Market Reports
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Posted: 10-05-2016 04:22:00 PM

What does the U.S. have to back up the dollar? Just its good will and its failing government policies. Unless we fix the problems here with the uncontrollable debt, entitlements and healthcare, China will pass us up as if we are standing still.

Gold experienced a two-fisted knockout punch yesterday thanks to the comments from Richmond Fed President Jeffery Lacker (as I discussed in yesterday’s Flash Gage) and the news that the ECB will be tapering QE.

Mr. Lacker opined that economic history suggests the interest rate should be about 1.5 percentage points higher than its current level given the current rates of joblessness and inflation. He also said preemptive increases in the federal funds rate are likely to play a critical role in maintaining the stability of inflation.

I find it interesting that Mr. Lacker’s comments had such an effect on the price of gold yesterday, as Mr. Lacker is NOT a voting member. My take is that his comments are just a tactic to try and influence some members who are against a rate hike as the data at this point does not justify his stance for a rate increase.

Yesterday’s Bloomberg report indicated that an informal consensus was building in the European Central Bank that quantitative easing will need to be tapered once a decision is taken to end the program. Those comments from the ECB, like some of the comments from some FED Presidents, only muddy the water and create uncertainties. And we all know the markets hate uncertainties. Japan of late is also wanting to taper back their stimulus as the hard push for a rate hike gains strength here on our shores.

A report released today indicated that China will continue to lead the world in production and consumption in gold. China produced 516 tons of gold last year, up 0.6 percent more than any other country. Increasing demand for gold jewelry and bars consumed 986 tons in China, up 3.7 percent which is also the highest in the world. Remember my comment from Monday explaining that the Chinese yuan had just become recognized by the IMF as the newest member of the SDR basket? This new report is the next step for China to reduce the dominance of the west in the global financial system. more gold in reserve translates to a stronger currency.

What does the U.S. have to back up the dollar? Just its good will and its failing government policies. Unless we fix the problems here with the uncontrollable debt, entitlements and healthcare, China will pass us up as if we are standing still. “Standing still,” sounds like
the only thing our lawmakers can take credit for.
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About The Author

Walter Pehowich Author Name: Walter Pehowich
This editorial has been prepared by 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. Reasonable people may disagree about the opinions expressed herein. In the event any of the assumptions used herein do not prove to be true, 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 the foregoing.

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