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.
While the US Dollar has traded down to 78.32 1/2 today, there may be some interesting developments on the horizon. The Federal Government has hinted that they may halt the purchasing of US T-Bonds at the end of October. Any Government intervention may cause increased volatility and unstable interest rates.
The potential weakened Dollar may help support the Gold Market enough to climb to higher territory.
Gold Chart
The Gold Market seems to be consolidating in the $940.00 - $965.00 range. It is my opinion that while the US Dollar Index is under fire, the Gold Market may maintain a higher range in the near-term. However, I am in sell mode temporarily until I see a bottom or a break-out through the $970.00 level for December Gold. While looking at the Gold Market, one may track the Euro FX Contract, Crude Oil and Stock Indices as these markets seem to be moving in tandem. Next week if the Gold can penetrate the $970.70 area, it is my opinion that the $999.00 area is not that far away. While the theory seems valid, we know that trading does not set up that easily. It is my opinion that a shake out of the longs may occur without any news or event. While my previous trades have been quite on the mark, (please refer to the two previous newsletters), these are the more difficult trade conditions. With the low volume typically in the month of August and the Federal Government involvement in the markets, we may see increased volatility and further spikes. The relationships between the Crude Oil demand, the US Dollar weakness and the strength in the Stock Market are stronger than usual and may occasionally change without notice and may alter the movement of the Gold Market. To further discuss the Crude Oil Market is to look at the sentiment toward our economy at present and potential increased demand of the Crude Oil. The feeling seems to be that the worst is over and that the road ahead may be difficult and certainly not without dissention on the varied programs introduced, but more money should pour into the equities and commodities September 1st. For example, please note also that we approach the hurricane and tropical storm season. Typically, the refineries may button up their production or may experience damage during this time. While these markets have great potential, one cannot ignore the Silver Market. It is my contention that the Copper Market in its higher trading may play a role in the movement of the Silver. The Silver in years past has often led the Gold Market and traders have traded the Gold/Silver Ratio Trade in previous years.
For those of you following last weeks Trade Recommendations: Please call in for a personal consultation to cover those positions.
New Potential Trades
Aggressive traders may look to Buy December Gold (EGCZ9) at $940.00 or better. Please be prepared for a potential move to $917.80. Hence; your stop/loss would be at $917.80.
Conservative traders may stand aside until the market has taken out some of the longs and has better volume.
Another suggestion for bullish Gold traders would be to possibly look at a Bull Call Spread: Sample of a spread:
December Gold (expiration 11/23/2009)
Buy GCZ9 950 Call and Sell GCZ9 1000 Call for approximately $1850.00 or better.
Risk is approximately $1850.00.
Profit Potential approximately $5000.00 (Less premium, commission and fees).
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.
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.
