The Weekly Gold Digger

The US Dollar showed some strength this week after talks in China.  The economic recovery seemed tied to the movements of the US Dollar Index.   These markets are also responding to the play by play of our economic recovery.  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 temporary bullish trend to a near-term potential high of $77.50.  Should the market penetrate $74.75, the market may resume its bearish stance for a long term target of $72.00  Why am I elaborating on the US Dollar as a Gold Trader?  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.  It is my opinion that the Gold Market has moved up very fast on the news of the IMF selling Gold to India.  The momentum created may have brought many traders in to the buying frenzy.  This action may also now launch some downside momentum should a Hedge Fund or Country decide to start selling their accumulated metal.  Often at years end, Hedge Fund Managers with good profits accumulated that quarter, month and/or year may wish to realize their percentage of the profits.  At that time, they may liquidate their positions to show their current track record without further risk in the market.  This may cause a temporary selloff in the market.  The ETF's are alive and well as billionaire John Paulson (Hedge Fund Manager) announced that he will begin a Gold Fund backed by his personal assets.     

Gold

The December Gold Market seems to find support at $1130.40 and a potential resistance of $1154.00.  Should the Gold Market breech $1116.40, we must be prepared for further bearish developments.  While next week may lead to temporary retracements in the Gold market, long term views of the Gold may be optimistic.  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 $1050.00 to $1060.00, one must be prepared for a potential support at $1026.90.00 or lower.  While I am cautionary during these economic conditions, my long-term objective on the Gold Market into 2010 is $1165.55 or higher.  Typically, I look for highs to be achieved in March of 2010 and then potentially July 2010.   

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.