follow the yellow brick road...

Good morning and welcome to another Fantastic Friday! Paul McCartney & Wings greet me this morning with their 1971 hit, “Another Day.”

The New York Spot Prices finally pulled back from the precipice yesterday with Gold closing up $9.20 settling in at $1,289.70, Silver was up $0.26 to $17.23, and Platinum rebounded $3.00 to close at $922. It wasn’t the turn I was hoping for, but heck, it’s just the beginning, right? This morning as I write this gold has lost yesterday’s gain plus some settling back to $1,279.90. Silver is down $0.17 to $17.06, and platinum is back to Wednesday’s close of $919 losing everything it gained yesterday.

So why the turn back towards the cliff? What I’m reading this morning is that the overnight loses may have been the rest of the world seeing the U.S. bullion banks dumping their “short contracts” and so they reacted and dumped theirs while we slept (or in some of our cases, while we tossed and turned). Anyway, Market Slant is reporting this morning that they believe the bullion banks should be out of shorts. If that’s the case, we’ll see the market reacting to the economy.

With all of that just said, another equally plausible explanation for the overnight drop in precious metals could have been the dollars reaction to the Senate late last night passing the $4 trillion 2018 budget which paves the way for $1.5 Trillion in tax cuts. The dollar pushed higher against all world currencies and therefore, precious metals as well.

Yesterday, TD Securities came out and said that in order for gold to build enough momentum to comfortably clear the $1,300 threshold, gold needs softer U.S. economic data and signs that the Federal Reserve is becoming more dovish. As I’ve said many times in the past, I think the U.S. economy is holding on, but not by much. I think the government has manipulated the statistics to present things better than they are – case in point is unemployment numbers. I’ll still be amazed if the Fed raises interest rates in December as they say. I believe a rate hike will take our economy even closer to a zero inflation rate or possibly even recession. And then there is talk that Yellen’s replacement will be more “hawkish” and that at least three more rate increases are planned for 2018. I don’t disagree that we need the rates higher, but will higher rates dampen the stock market? Seems to me we’re damned if we do…damned if we don’t.

So, as long as the Feds continue to talk about a rate hike in December, precious metals will continue to be under pressure. But even with this pressure, how long will the stock market continue this rally? I read a lot of essays that come down on both sides of the fence. In other words, some economists are predicting continued positive growth. I, not because of my precious metal holdings although they do play a part in my thoughts, am more of a pragmatist. I mean, just look at the issues on the table. Even if somehow you can take North Korea out of the equation, we still have wars in Afghanistan and the Middle East that are crushing our economy, the Chinese gold backed oil exchange that is bypassing our sanctions with Russia, Iran, and Venezuela while it undermines the dollar reserve status, and of course, if the dollar continues to shine, exported U.S. manufactured goods will cost more and become less competitive. Of course this causes a manufacturing slowdown, lay-offs, etc., etc., etc. I just can't see this market continuing much longer before it needs to breathe. Just as long as Black Monday is 30 years behind us!

Although I don’t believe that we’ll see $5,000 an ounce gold by December as some analysts have predicted, I do think that having physically held precious metals as a part of any portfolio is a sound strategy. CNN reported that so far in 2017 the S&P has gained 9% and gold (drum roll please...) has gained an impressive 12%. Not too shabby!

Well, I’ll let that be it for today. Go out there and make a difference! See ya’ll later!

*Disclaimer: Precious Metal Musings™ is written for entertainment and news purposes only and should not be used in making purchases and/or sales of precious metals.