Strong Dollar Pressures Gold and Silver

A strong dollar and extensive outflows in the gold and silver ETFs overnight are putting continued pressure on the price of gold and silver.

The dollar index hitting the 100 figure overnight is bringing gold down to its knees at a major support level at $1,212 in the December contract.

The combination of a very strong dollar and higher real interest rates will continue to put a sell bias in the precious metals arena.

On Friday, Federal Reserve Vice Chairman Stanley Fisher indicated, that the FED is ready to raise rates in December as the Fed’s numbers on inflation and job growth are very close to meeting their objectives.

The CME Fed watch tool indicates the chance of a rate hike in December is at 85.8 percent. The concern I have, since a December rate hike is almost a given, is how many more rate hikes will be put into place in 2017?

I have to give some press to my technical friends this morning, as they have stood by me all year with great analysis, they say gold must hold $1,212 in the December contract, then there will be some support, but not much, at the $1,206 level. If that level gets violated it’s off to the races. They claim after that, the next level to watch for will be $ 1178.

Silver is in the same boat, maybe a little more vulnerable, with weak support levels at $ 16.90, $ 16.58 and again at $ 16.45.

The financial advisors I spoke with this morning indicated that they have seen a complete reversal of the so-called “have to have a balanced portfolio” mentality to a “find me the best stocks that will flourish during the next four years under the Trump administration” mentality. Quite a change after the record levels seen in the ETF holdings this year.

Retail physical redemptions have gained momentum and some dealers indicated that they will be reducing bids for certain products as carrying costs are expected to increase in the short term and some breathing room is needed to carry that inventory.