The US Dollar closed lower on the day today!  Gross Domestic Product came in at a slow 1.6 % annual rate lower than the estimated 2.4%.  New single family homes sales dropped to 276,000 unit annual rate down 12.4%.  Existing home sales dropped 27.2 % to an annual rate of 3.83 million units.  Initial Jobless Claims for unemployment benefits fell 31,000 to a seasonally adjusted 473,000 last week below market expectations.   The E-Mini S&P500 rallied back today to a high of $1064.00.  Short covering or not, we are seeing some strength here.  Technically, on the S&P500 chart, one might see a potential double bottom.  Short-term, I see that market moving higher.  Buyers beware, after Labor Day when the market may seem to shrug off any bad news.   I still anticipate a bottom on the market sometime between September 15th and November 15th.  Sometimes markets may synthetically look like a buying opportunity, while setting up for the next drop.      

The US Dollar ended the week lower on the day at $82.78!  While still technically bullish, anticipate a lower trade next week.  Should the US Dollar Index cross $82.08, the trend will have changed.  The high this week was $83.635 and the low $82.665.  While I speak of the paper assets, one may notice the trend change today in the US T-Bonds.   We are pulling back from a top of $136^31.  I feel that both of these markets will have tremendous opportunities in potential trades.   I also see the inverse relationship between the Gold Market and US Dollar potentially returning.  The safe-haven products may at times move together in economic times that breed fear in the marketplace.   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 XAU has traded higher.  The Exchange Traded Fund (GLD) reported holdings unchanged.  

The World Gold Council reported that demand was strong especially through China and India.  The ETF from India is showing consistent holdings flowing into the fund.  Speculative buying is increasing on the Commitment of Traders Graphics.  The allocations of funds may be rerouted from products such as paper assets and the Gold Market.  This next week, we could potentially see a flow into the Stock Market and currencies.  Next week may have some erratic trading just prior to the Labor Day Holiday on the following Monday.  We will have:

Monday =  Personal Income

Tuesday =  Chicago PMI & Consumer Confidence

Wednesday =  ISM & Construction Spending

Thursday  =  Initial Jobless Claims & Factory  Orders

Friday  =  Unemployment & ISM Manufacturing Index.

We may potentially see the Gold Market $1226.00 - $1250.00.  For those using a stop and reverse indicator, the moves may still be viable.  For those seeking an entry, use of the options or buys on the dips may prove feasible.  Otherwise, it may be best to wait for the Labor Day Weekend, as the volume may pick up and trends may come back into play. 

Gold

The December Gold has reached a high this week of $1246.00 and a low of $1211.70.  I am in a bullish mode and look for support around $1226.00 to buy this market.  We need this market to breach $1250.70 the get any momentum behind it.  We will continue to see resistance levels to conquer such as $1270.60.  $1213.00 must not be violated to keep the bullish posture!  Those who hold long positions may want to trail stops to protect any accumulated profits or prevent losses. 

While I am long term bullish this market, it is essential to have a trading plan with worst-case scenarios in mind.  Once you accept the risk of the trade, then all you need do is follow the plan.  Intra-day trading, we do bracket our trades with precise stops.  The use of stops, while prohibitive may allow an account take smaller losses during some very large market moves.  To live to trade another day!  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 was $1365.55 or higher prior to the new tax on import rule from India.  Now we may find the market potentially could climb to $1326.00.  Gold is still a Safe-Haven market that seems to hold value during most economic conditions.

No new trades!  I would like to see another leg down before taking a long position in the Gold Market.  We do daily short-term trades based on technical indicators.

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.

The premiums of the Gold Options may be inflated after the increased volatility and market move. 

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.