The Weekly Gold Digger
The US Dollar showed slight strength today after the University of Michigan Consumer Sentiment fell this month. This report reflects the spending habits and potential economic recovery of the US. The Bank of America also released a loss in their third quarter which may lead to paper assets getting a boost from a risk adverse investment sentiment. While temporarily seeing a fairly positive day for the US Dollar Index, unless we penetrate $77.11, the trend is potentially bearish for the long term. In my opinion, the US Dollar Index could eventually find a target around $72.00. The market is as a whole has turned its focus to 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. 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. 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. December Gold (Pit) settled today at $1051.50, pulling back off the highs of the week which exceeded $1072.00. While Indian Wedding Season Gold purchases have remained flat along with Dubai's, the funds and some major analysts seem extremely bullish on the gold market.
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 weaker US Dollar has lifted prices of the tangible commodity markets this week until Friday as consumer confidence waned. Support points in the December Gold would be approximately $1022.00 and $986.00 while the resistance may occur at $1072.00. While next week may lead to temporary retracements in the Gold market, long term views of the Gold may be optimistic. My concern is with large funds or countries such as China holding quantities of Gold. I have witnessed the selling of such concerns creating further selling momentum. These large entities may act as speculators simply buying and selling for a differential in price and thus moving the market. Small traders should be sure to follow their trading plan with a distinct plan with risk parameters set to their risk tolerance. The use of stops, while prohibitive may allow an account take smaller losses during some very large market moves. The use of options with futures positions and/or option strategies may again keep the risk at a specific level. Entering this market at $1022.00, one must be prepared for a potential support at $986.00 or lower. While I am cautionary during these economic conditions, my long-term objective on the Gold Market into 2010 is $1165.55.
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.
