The price of gold starts off the week on solid ground at a three week high. All four metals in the green this morning, as we witness weakness in the U. S. dollar.
New York FED president William Dudley said Friday, “Uncertainty over the outlook for the U.S. economy is higher than usual, which calls for a cautious and gradual approach to interest-rate increases. The factors behind the financial turbulence we saw earlier this year do not yet appear to be resolved fully.”
IMF President Christine Lagarde last week called on policymakers to pass a range of economic reforms to avoid the trap of years of lackluster growth — a trap which the International Monetary Fund’s managing director said risked stoking frustrations with the global economic and political establishment. Global growth “remains too slow, too fragile and risks to its durability are increasing,” Ms Lagarde said on Tuesday in Frankfurt, adding that the threat of a “new mediocre” of weak economic progress had risen.
So if you follow the comments of Fed chairperson, Janet Yellen and IMF Director Christine Lagarde, they both seem to paint a picture that the economic landscape is a rocky road at best.
Another problem that both Europe and the U. S. must address is pension reform. It is my belief that this topic needs to be addressed immediately. And with our 19 trillion dollar debt problem and the Greece debt problem (which seems to be Germany's biggest headache, besides the migrant issue) most legislators here and in Europe just don't want to bring up the topic in any conversation. At the state level here, there are big problems in California, Illinois, and New Jersey with legislators there trying to figure out how to meet their future obligations. So whether it is issues at the state level, FED level or over in Europe, higher interest rates are not the answer and rate hikes here are so out of the question in my opinion. The FED will not have the data they need to raise rates anytime soon.
What I do expect you will see is a gradual increase in the gold price as all these problems come to a head. One by one, investors will see the writing on the wall and in turn look to gold to be their investment of choice as the world battles all these problems that JUST WON‘T GO AWAY.
Author Name: Walter Pehowich
Walter Pehowich is the executive vice president of precious metals investment services for Dillon Gage with over 38 years of experience in precious metals investment services. His career began in 1977 at Bache (which evolved to Prudential-Bache Securities and then Jefferies Investment Bank). While at Jefferies, he served as senior vice president with oversight of investment grade precious metal products. Pehowich holds a National Futures Association (NFA) Series 3 license, authorizing him to advise and sell alternative investments in commodities and futures markets.