The Weekly Gold Digger
The US Dollar traded higher on the day hitting a high of $80.82 penetrating my near-term potential high of last week $80.00. This last week has been a waiting game for the Unemployment Report from today! The report was positive with less people looking for jobs, but flat in creating new jobs. The US Dollar reacted to the debt worries of Greece, Portugal, Ireland and Spain. The more uncertain we are in this Global marketplace about the financial health of varied countries, the stronger our dollar will become. Recovery, not just for the US, but other countries will play upon the sentiment of our economics. The target for the US Dollar now is taken to $82.00 in the near-term. Should the US Dollar come down through $78.83, it should potentially go into a sell mode. 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? 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 $1044.50 today. The XAU traded a bit lower. The Exchange Traded Fund (GLD) reported holdings down on the previous session. The risk appetite of the investor is definately a factor at this point. Buyers are holding out for the washout to be over. Crude oil has tumbled this week with a low of $69.50. In my opinion, it is targeting $68.00. Demand is playing a crucial role in the movement of the Crude Oil. The US Dollar and the health of the Euro Zone is also vital to the energy complex. The energies can often impact the gold market. The relationships are integral to trading the gold market.
Gold
The April Gold broke through the previous range to the downside to a near-term low of $1044.50. The market has taken out my soft support at $1050.00. If my hard support of $1028.00 is taken out, we could go much lower. In one of my previous issues, I had reported that China wanted to buy Gold at $880.00. At the time it seemed quite farfetched. In the meantime should my hard support hold, my range is $1043.80 - $1126.40. If the market can break out of $1126.40, I would look for a move back to the old highs. 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/or 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
For those traders that wish to participate in the Gold Market with a defined risk. An options strategy would potentially work better than a futures position. The Buyer of an option pays a premium for the option, which is a right to a long (Call) or short (Put) position in the futures market at their selected strike price.
Example:
Follow through on existing trade:
This position filled and is still in range for those who wish to enter the gold market without a margin requirement. The purchase of an option limits one to the premium or cost of the option with commissions and fees without being subject to margins calls.
For those in the position: One may put in an order GTC to Sell the GCJ10 @ 10.00 or wait to see how the trade shapes up before determining a profit target or a stop loss.
Trade from 1-29-2010.
Buy GCJ10 1200 Call at 5.00 or better (Limit). The risk would be $500.00 plus commission and fees. The profit potential is unlimited. The expiration of the option is March 25th 2010.
Aggressive & conservative traders may stand aside until the market has retraced..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.
