The Weekly Gold Digger

While the US Dollar has bounced on Friday possibly due to short covering, it has come off of a 12 month low. The December US Dollar hit a high of $76.93 and may consolidate at this level. 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 may be subject to the FOMC Meeting next week. Hence the meeting can also affect our Gold Market. The US Dollar may be oversold, but the low yield is quite discouraging to investors, so this move up today may be very temporary. Recent economic reports have clearly marked a more positive light to our manufacturing, employment and housing markets. If the dollar does not pick up some buying momentum, we should see a lower US Dollar and quite possibly a higher Gold Market, at least until we reach a potential high of $1033.00 on the December Gold contract. This seems to be a strategic point whereby the market may stop and reverse or possibly retain momentum to a possible $1040.00 or higher.

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 maintained its bullish stance staying above that very vital $1000.00 mark. While investors that normally do not adhere to risk are torn between making money in a low interest bearing market and the risk inherent in trading futures markets. ETF buying is at record highs. India is going into their festival season with Dussera later this month and Diwali and Dhanteras in October. The festivals may bring the gold buyers, but typically the households in India may sell their gold when the prices are high. The high prices bring renewed interest in the South African Mines. Gold production this year could be around 4.5 tonnes produced this year. Some mines that have been shut down have recently been reopened. 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 still anticipate a target of $1040.00 on the upside, but nevertheless would also anticipate profit taking possible at $1033.00. It is still my thought that before the Gold Market really takes off, it may suffer a liquidation to take out the longs. My retracement level ideally is $968.00 on the December Gold contract. 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. 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 and create additional revenue to buy more as prices come down.

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.

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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.

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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.