The Weekly Gold Digger
The Gold market has been a hedge against inflationary concerns for years. The relationship between Gold and the US Dollar continues its inverse course. While the US Dollar remains weighted against the six major currencies, Gold may be boosted by a variety of factors: It is purchased as a safe-haven by investors shifting from low interest bearing government bonds and other products that cannot keep up with the rate of inflation. The Gold may be traded in physical bullion, ETF’s, XAU, Spider Gold Trust and futures contracts to name a few. Typically, in years past, the currency of a country could be backed by physical gold.
Gold Chart
The Gold Market seems to be consolidating in the $960.00 - $975.00 range. It is my opinion that overhead stops may trigger choppy volatile conditions that I would normally anticipate occurring at $999.00. The US Dollar Index, while still in a sell mode according to my indicators, may trade higher. The US T-Bonds are turning bullish according to my indicators in the near term, and the paper assets may temporarily have an edge.
The Crude Oil, while the weekly inventory report gave a negative reading, has held $70.00 fairly well. This support will also bode well for the Gold Market.
Those anticipating a wash out in the Stock Indices may look toward fall. Typically, the month of August is a low volume trading month that may trade in a range without strong moves. Possibly the strongest move we may see would occur on Friday or Monday depending on the Unemployment Report and Non-Farm Payroll Report due out tomorrow morning at 7:30CST.
The CME Group announced that they are introducing Mini Gold Kilogram contracts to meet the increased interest of investors. The smaller contracts may allow investors to participate in the Gold Market with less margin.
For those of you following last weeks Trade Recommendations:
7/28/09 The Gold Market may continue higher once breaking through the (EGCZ9) $960.00 resistance. It is my opinion that one may buy Gold at (EGCZ9) $933.00 with a $916.00 Stop. The risk would be $1700.00 approximately on a big contract or $510.00 approximately on a small Gold contract.
Long-term bulls may cancel/replace their $916.00 Stop Loss to break even $933.00. For those without long-term goals to accumulate product, please take profits $965.00 - $975.00. (One of my favorite books as a child was “The Richest Man In Babylon” which says to pay yourself.)
($965.00 - $933.00 = $3200.00 per contract on the 100 troy ounce contract approximately less commissions and fees.)
For those of you that did not enter the Gold Market on last weeks entry, please wait for a pull back in the 940’s. Retracements, in my opinion are eminent before this market reaches the highs.
7/28/09 Another suggestion for bullish Gold traders would be to possibly look at a Bull Call Spread: Sample of a spread:
December Gold (118 days until expiration) 11/23/2009
Buy GCZ9 950 Call and Sell GCZ9 1000 Call for approximately $1200.00. Risk is approximately $1200.00.
Profit Potential approximately $5000.00
For those who may have entered the sample Bull/Call Spread, you may take approximately $1000.00 profit or hold until the market may potentially reach $1000.00 by November 23rd. Approximately $5000.00 would be realized at that level less commissions and fees.
Due to the fluctuations in this market, please consult with your broker, or call us to strategize a risk management plan in line with your personal risk tolerance. Traders that wish to participate in the Gold Futures Markets may look at the E-Mini Gold contracts which have a lower margin requirement than that of the larger Gold contract. Please look for current margins before entering this market and be sure to allow cash cushion for any adverse conditions. Please consult with your broker to calculate the risk, stop loss orders or option strategies before entering such a volatile market. Investors that wish to take a position in the Gold Futures market should devise a plan according to their goals, risk tolerance and the amount of money they are willing to risk in this sector. Like many other investments, the success of the trading plan must take into consideration the timing of the entries and exits.
Contact Me
Please call or email me for the complete recommendation to coincide with your risk tolerance, so that we may apply the correct Money Management. The Weekly Gold Digger is a Free Weekly subscription to receive trading opportunities by email along with fundamental commentary and basic technical points of interest.
Take a close look and feel free to call in and talk to me in greater detail. It would be my pleasure. Good trading!
Call me at (877) 224-1952 or email me at lburton@danielstrading.com
Risk Disclosure
You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. Daniels Trading is not affiliated with nor does it endorse any trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or services.
Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.
