8-13-2009
As regular viewers of our videos know, we are constantly adding new video products. Guests on our videos now include:
- Jake Bernstein of Jake Bernstein's Weekly Market Letter on market trends
- Mark Leibovit of VR Trader.com on market timing
- And of course me, Ira Epstein
http://iraepstein.linngroup.com/videos.html?rand=0.021
I also now record mid-day webinars and holding live webinars at 12:30 PM CST on selective days. Customers are and will continue to be invited to attend. Each day’s webinar, whether live or recorded is posted on our website and can be accessed through your IraChart Software.
Seasonal Story
The chart below was supplied by The Moore Research Institute .
August has witnessed the taking out of the month of July’s high. Unless July’s low of 904.8 is taken out, the seasonal chart formation above remains intact.
Yesterday’s FOMC Announcement that the economy is still on shaky ground and that the immediate future for job creation doesn’t look good left the Dollar under pressure. A lower Dollar is supportive to gold.
Monthly Gold Chart
Price action on the Monthly Gold Chart is creating a “triangle patter”. This is shown by the “white lines”, narrowing in on the above chart. Each current low has been higher than the prior low and each recent high has been a lower high. Consolidation is what is taking place.
Couple this with the Seasonal Chart above and the bias, purely in terms of price and time, is to me at least that a breakout to the upside will occur later this year. From what level and when are as usual the most important questions to be asked when using the leverage futures contracts provide.
Gold versus the Dollar
Gold and the US Dollar have a relationship, a relationship that often changes. Sometimes in unison the Dollar and Gold rally or break. At other times they have an inverse relationship. World economics and fear often dictate the relationship.
The inverse relationship at work now has to do with the large amount of debt the US has taken on in order to stimulate the US economy, the lack of job growth in the US and the willingness of investors to move to higher risk currencies for investment. Safety is not on their minds.
As the Dollar falls, gold is moving higher to compensate for the decline in the Dollar. Some might argue that in terms of the Euro gold has been flat, while in Dollar terms Gold is rising.
Stimulus programs are behind worries about the value of the Dollar. Other nations have stimulus programs in place. Some such as England are questioning the ongoing value of their programs while Russia is just now adding their own version of a “cash for clunkers” auto program. Regardless of the outcome, the amount of debt as a nation the US has committed itself to in comparison to our GDP has gotten out of whack.
At this time movement out of the Dollar is taking place. Investors have developed an appetite for investments in currencies riskier than the Dollar. This could be due in part to the overall market “stability” seen via stock prices around the world.
When the worst of the economic mess hit in March 2009, the Dollar peaked. Investors who bought Dollars in late 2008 and early 2009 as a safe haven investment began dumping those Dollars in late March 2009. That dumping continues today.
As the Dollar continues to lose value, investors who dump Dollars are looking for places to invest their funds. World stock markets, energy and metal markets are where those funds are being put to use.
The above chart tells the story.
Currency plays typically last long period of time. 
I continue to believe that the way to buy time and play for an uptrend in gold is to do so using Call Option Spreads in December Gold.
I like the following two spreads.
The first is to buy long the December Gold 1000 Call versus the December Gold 1050 Call.
The second is to buy the December Gold 1000 Call versus the December Gold 1025 Call.
In my twice Daily Market Update Report I will tell you the price at which I recommend entry. The nice part is that your risk is limited to the price you pay plus commissions. Upside potential in my opinion is large.
Research
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Disclaimer: This publication is strictly the opinion of its writer and is intended solely for informative purposes and is not to be construed, under any circumstances, by implication or otherwise, as an offer to sell or a solicitation to buy or trade in any commodities or securities herein named. Information is taken from sources believed to be reliable, but is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted. Futures and Options on Futures trading involve risk. In no event should the content of this market letter be construed as an express or implied promise, guarantee or implication by or from The Ira Epstein Division of The Linn Group, Inc or The Linn Group, Inc. that you will profit or that losses can or will be limited in any manner whatsoever. No such promises, guarantees or implications are given. Past results are no indication of future performance.
