The Weekly Gold Digger

While the US Dollar has traded lower in light of flight to quality selling, I anticipate a potential move to $77.52.  The inverse relationship between the US Dollar and the Gold market is still intact.

Another factor that can cause havoc with our Gold Market is if the CFTC (Commodities Futures Trading Commission) enforces rules to limit the liquidity in the Crude Oil Market.  The limited liquidity may allow the market to move by fewer traders that may be able to take the market down to $50.00.  Saudi Arabia may keep an increased output of the oil causing a bearish sentiment due to larger inventories.

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 still consolidating in the $940.00 - $975.00 range.  It is my opinion that the volume has been quite thin during the month of August.  In September, I expect the bigger players to come into the market.  I then expect a potential spike, break out or break.  It is still my thought that before the Gold Market really takes off, it may suffer a liquidation to take out the longs.  Points of interest should this theory of mine become a reality would be $905.00, $888.00 and $866.00. This is what I will look for as an opportunity to enter the Gold Market for a longer time frame.  The Crude Oil may have a bearish effect on the Gold prices while the lower US Dollar Index should support prices.  We still must enter into the Indian Wedding, where it is difficult to foresee if the current prices of gold will have any appeal to the wedding trade.  Physical bullion sales have been down somewhat in the month of August.  I would expect September to hold a great deal of volatility and surprises for us.  Those that have looked for bearish opportunities in the Stock Market may finally have their entries.

For those of you following last weeks Trade Recommendations:  Please call in for a personal consultation to cover those positions.

New Potential Trades and Trade Follow-up

It was suggested:

For those aggressive traders that are looking for an entry, I am recommending a new entry based on the market retracing lower in the week ahead.

Buy December Gold (EGCZ9) at $940.00 or better. Again, please be prepared for a potential move to $925.20. Hence, place your sell stop at $925.20. The risk would be $1480.00 (Plus commissions and fees).

I am now suggesting that those traders that went long December Gold (EGCZ9) at $940.00 last week, take profits at $950.00 or better. The profit would be $1000.00 less commission.

Buy December Gold (EGCZ9) at $940.00 or better.  Again, please be prepared for a potential move to $925.20.  Hence, place your sell stop at $925.20.  The risk would be $1480.00

Aggressive & conservative traders may stand aside until the market has taken out some of the longs and has better volume.

No new trades suggested in the weekly time frame.

Please call for finer tuned trades daily.

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, commissions and fees).

The options spread is a long term trade that may not move significantly during the range traded time frames.

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.

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.