The Weekly Gold Digger
The economy expands and contracts according to supply/demand, availability of consumer spending and the sentiment of the country at that particular time. As we see the liquidation in jobs, tightness within the economy and the underlying fear of instability in the economy there we see the contraction. This is typically overdone as the mindset of the people focuses on bankruptcies, housing depreciation and job security. What we must reflect upon is that we cycle the shakeouts and tightening to later experience the expansion to come. The market is as a whole has turned its focus to the US Dollar. The December US Dollar hit a high of $77.735 this week climbing higher on what I believe to be a short-term trend line higher. It may trade higher, quite possibly to $79.50. We had experienced losses in the US Non-Farms Payroll report today which supported the temporary bullish sentiment of the US Dollar. While in theory a strong US Dollar may be appealing, our products become more attractive to the global marketplace when our US Dollar is weaker. I am of the opinion that this temporary strength may be short lived. Retracements are healthy and necessary for the marketplace. In this case, I still believe that in the long term, we shall see the US Dollar drift lower. $76.50 or lower should create an additional selling in my opinion The ICE Futures U.S. Dollar Index (USDX®), is the international value of the US dollar and the world's most widely-recognized, publicly-traded currency index. By using the Dollar Index, traders can take advantage of moves in the value of the US dollar relative to a basket of world currencies or can hedge their portfolio of assets against the risk of a move in the US dollar in a single transaction. US Dollar Index futures are traded for 22 hours a day on the electronic trading platform of the Intercontinental Exchange (ICE). Why am I elaborating on the US Dollar as a Gold Trader? The US Dollar and the Gold Market seem to be locked in a mirrored relationship at least for this time period. While the stronger US Dollar Index has pressured the Gold Market, it has held support at $985.00. Factors that may be of concern to Gold Traders may be possible lessened demand at the higher prices of Gold, recycled gold and possible increased mining or production of gold.
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
The December Gold contract has tumbled this morning to a low of $987.00. By mid-morning, the December Gold contract had gone for the high of the day $1008.80. This range has an interesting twist with so many speculators holding their longs. It is my opinion that a liquidation is necessary before we can head up beyond our previous highs $1060.00 approximately in March of 08. Often traders will trail their stop losses to prevent losing any cumulative profits on positions held. By this, the selling volume may increase and give momentum to a temporary weakness in the market. The indicators used by many traders revert to bearish sentiment which will further push the markets lower. While I remain long-term bullish, the near-term support may be $975.00. Should the market breach the $937.80 level, the damage to the chart formation may give us a bear market longer term. If the market can trade through $1013.20, it may pick up further buying interest to possibly $1023.00.
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
Aggressive & conservative traders may stand aside until the market has retraced..
No new trades suggested in the weekly time frame.
Please call for finer tuned trades daily.
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.
