-- Posted Thursday, 4 June 2009 | Digg This Article
| | Source: GoldSeek.com
Aug Gold: Open= 964.0 High= 983.4 Low= 962.0 Last= 982.4 +17.1
Yesterday’s market washout relieved enough pressure on commodity markets to enable large gains during today’s session. Gold erased almost all of yesterday’s drawdown, holding the $960 support level and bounced straight back up. With many traders weary about the future of the dollar, the large break was the event some needed to get long the market. Same goes for many other markets today as energies, grains, and the other metals posted large gains on stronger volumes.
While the U.S. dollar index dropped only 0.2% today, commodity bulls obviously needed little encouragement to take advantage of the break in prices. In bull markets, weakness is bought, and so it was. Interesting buyers are stepping into the market, too. According to Bloomberg, Northwestern Mutual Life Insurance Co, one of the largest life-insurance companies in the U.S., recently bought gold. For the first time, that is. The company is 152 years old. The CEO said that, “Gold just seems to make sense; it’s a store of value. The downside risk is limited, but the upside is large. We have stocks in our portfolio that lost 95%...and gold is not going down to $90.”
What’s becoming very apparent is simply that the United States is less the financial safe-haven that it was 20 years ago. The global economy is changing shape, thought the scale and magnitude is harder to swallow. The US dollar is so prevalent around the world that the fear of its collapse produces two trains of thought: to save it and to insulate oneself from the possible collapse. This is exactly what other nations are doing, like China, by continuing to invest in the US, albeit with a different strategy and hedging against the dollar decline with exposure to commodities.
Why commodities? Money is simple a placeholder of value to exchange for real goods. Instead of collecting cash like China had been doing, why not collect the goods, or at least direct access to those goods? Not many would like to see the collapse of the dollar but no one wants to be the last person holding the debt either.
This is likely why long term interest rates are moving up, as demand in shorter term rates increases, thus reducing one’s time exposure to the dollar and letting others take on greater risk. If this continues for too long, the Fed may have to start purchasing long term debt with money it does not have, leading to inflation.
For now, support at $960 held, both yesterday and today, but bulls would breath a little easier if gold were to resume its downward trend. Support comes in near $974, $970 and $960. Resistance is found at $983 and $990, and $1,001.
Review charts on these markets here www.britefutures.com. Remember that futures and options can be used for bullish or bearish positions; feel free to contact me to discuss trading strategies. Each contract/option = 100 ounces, a $1 move in a futures contract = $100.
To open an account and receive trading recommendations on gold futures or options contracts (also stock indices, energies, currencies, etc.), or to use our online paper trading service BriteTrak, contact me at tom@altavest.com. Visit www.altavest.com to request a Free Trading Kit. Keep in mind that there is risk of loss in all trading.
Thank you,
Thomas Hartmann
Altavest Worldwide Trading, Inc.
800 994 9566 x109
949 488 0545 x109
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-- Posted Thursday, 4 June 2009 | Digg This Article | Source: GoldSeek.com
