The Weekly Gold Digger
The US Dollar traded lower on the day with a high of $78.73 and a low of $78.22. The week topped out at my near-term potential high of $79.00 per last weeks edition. This week has been fairly uneventful until President Barack Obama came out with a statement of his proposal limiting top banks risk profiles. This would prohibit banks from placing money in hedge funds or private equity funds. This, along with a larger jobless claims report and a slower than anticipated recovery in China lead the stock market and the gold market lower in today's trading. Next week could be potentially the most uncertain economic picture we have seen in quite some time. We have the FOMC (Federal Open Market Committee) meeting Tuesday and Wednesday. While we do not see a policy change resulting from this meeting, any statement that may infer a reduced "extended period" without a policy change may trigger a spike in the markets. Also Federal Chairman Bernanke's appointment ends January 31st and congress has yet to vote him in for another four years. He has been under scrutiny for not predicting the economic crisis. This uncertainty that we have next week may lead to a lower consumer sentiment. While the financial challenges remain the focus of our investment world, we may see investors flock to the paper assets. Those individuals that trade the interest rate futures may find the US T-Bond chart quite enticing. 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 may sell off as we have hit my predicted $79.00, but it needs to penetrate $76.96 to gain any momentum. Should the market penetrate $75.00, the market may take a bearish stance for a long term target of $72.00 The US Dollar should remain under $79.95 to continue a long term bear move. Next week, being so uncertain, it may be wise to stand aside until the statement by the FMOC and the appointment for Bernanke. 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. The Gold Market spiked down to a low of $1081.90 today. The XAU traded a bit lower. The Exchange Traded Fund (GLD) reported holdings steady on the previous session. It has been stated that India may purchase more gold toward their objective of $1070.00 or lower.
Gold
The February Gold broke through the previous range to the downside. The market is approaching my previous buy zone of $1075.00. With this in mind and knowing that we are at the mercy of the unknown in terms of policy etc., the potential buy zone may be lowered to $1060.00. Please not that the market may take off on any of the conditions stated above. This could be the support area if something dynamic hits the press, but without any eventful news $1050.00 may be soft support while $1028.00 remains my hard support. 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. While I am cautionary during these economic conditions, my long-term objective on the Gold Market into 2010 is $1365.55 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
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.
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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.
