The Weekly Gold Digger

While the US Dollar has traded lower in light of flight to quality selling, I anticipate a potential move to $76.02 in the near term and further to a potential $72.50 in the following months.  The bearish sentiment toward the US Dollar is partly due to the reports giving us a brighter outlook for the Chinese growth and anticipated continued recovery.  On the flipside, China exports are down which will pressure domestic sales.  With the economic growth in China, food prices have a tendency to go up and may risk inflation.  The food products make up about one third of the Consumer Price Index in China.  The inverse relationship between the US Dollar and the Gold market is still intact. We saw a sharp spike up in both the Gold and the Silver markets today which could reflect the weakened dollar.

 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 has broken out of it's range today reaching a high of $1013.70 December contract.  The question is where do we go from here?  It is euphoric for Gold Bugs to experience these highs within the Gold Market, but there still should be caution exercised.  I would anticipate a target of $1040.00 on the upside, but nevertheless would also anticipate profit taking.  It is still my thought that before the Gold Market really takes off, it may suffer a liquidation to take out the longs.  This is what I will look for as an opportunity to enter the Gold Market for a longer time frame.  On the fundamental front, many countries are not and may not purchase the physical metals at these prices.  More importantly, we need to look to China more than ever to determine the direction of many of the markets.  Beijing has suggested to its people to buy Gold.  They have remarks that suggest that they are hoping to stockpile more Gold.  It has been my opinion  that many countries will stockpile a quantity of a commodity until the prices have rallied to highs,  then they will sell off quantities simply to speculate.

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

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.