The Weekly Gold Digger
The US Dollar showed some strength this week with hopes of economic recovery. As we follow each economic report, the market sentiment seems to increase the trading range of many of our markets. These moves coincide with my recent intra-day strategies. Today Consumer Spending falls and Employment Costs rise fueling sentiment that recovery may be further down the road than we anticipate. Yesterday, GDP rose 3.5% creating more clues of a near-term recovery. Personal Income remains unchanged. We often think of the reports determining the moves of the market, yet it is clearly the interpretation of the report by the traders. Next week, there are further reports including the FOMC meeting. I do not anticipate any changes in policy, but will keep a watchfull eye on the market and affects of the meeting. We will be gaging the economic recovery on a variety of factors and the affect on the US Dollar. 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). The US Dollar appears to be in a bullish to sideways trend in the near-term $76.00-$77.00. Should the market penetrate $79.00, the higher range would consolidate. Should the market break below $75.00, then we would target $72.00. 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. The Gold Market is retaining some strength despite the Russians selling off a bit of their gold, a variety of mines increasing their production and demand slowing at the current prices. December Gold (Pit) settled today at $1040.40, pulling back off the highs of the week which was $1060.80. Buyers of the Gold may wait for a retreat to $1022.00-$1029 to accumulate further holdings. We still may see some purchased through the Indian Wedding Season. 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 Market seems to find support at $1026.30, where we find a double bottom. Normally, I would consider this formation extremely bullish. With the market reacting to the US Dollar Index and the recovery attempts by the US Government, we cannot rely on the formation itself. If this double bottom is breeched, support points in the December Gold would be approximately $1022.00 and $986.00 while the resistance may occur at $1062.00. While next week may lead to temporary retracements in the Gold market, long term views of the Gold may be optimistic. If this market can power through $1072.00, we will have our rally with very little resistance in the near future. 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.
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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.
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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.
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.
