-- Posted Monday, 24 August 2009 | Digg This Article
| | Source: GoldSeek.com
Dec Gold: Open= 954.8 High= 958.5 Low= 935.7 Last= 944.7 -10.1
December gold prices managed to stay within the converging trend lines again, prolonging the drawn out consolidation pattern. Optimism carried over from last week dissipated by mid-day, as even a brief rally in equities after the pit open did not push gold into positive territory. As the equities lost their positive momentum and went slightly lower, it appeared that gold bulls either gave up the fight or some sellers stepped up. Buyers would come in to support prices along the lower trend-line but it remains to be seen which direction the market will ultimately break in the days ahead.
The slate of economic reports is likely to provide enough stimuli to forge a break-out by Thursday morning. Tomorrow, the Consumer Confidence report has the spotlight. With fuel prices on the rise, cantankerous political debate, and a flat job market, it could be too much to ask for a glowing number. The report holds slightly more risk to the downside than most expect.
Wednesday sees new home sales figures, advanced durable goods sales, and energy stocks. While the market cheered last week’s existing home sales report, though largely due to first-time homebuyers and more distressed listings, it was none-the-less fairly positive that buyers stepped up with cash. But is the appetite for new, more expensive homes as large? Not likely.
Thursday, of course, holds the regularly scheduled initial jobless claims numbers, and many bulls will be dismayed if the number rises for the third week in a row. At the same time, a revised reading of the second quarter GDP number will be announced. A lower revision would not be beneficial, as an economic recovery should contain upward revisions. As one can conclude, this week is likely the end of the gold consolidation that has been seen on the charts for the past six months. The chart simply cannot be wound much tighter.
Traders should be ready to make a move in the market at this stage, but if aggressive traders are to make an early call on the market, get some protection in case the market breaks out in the opposite direction. There is a healthy bit of skepticism in the markets that this recovery will not be straight up and so sets up a potential correction or downside breakout no matter what the longer term fundamentals indicate. Meaning December call option contracts, with only three months remaining, may not hold their value well if this market breaks down for a month or more.
A bullish play, however, would be to buy futures near today’s level and a $945 put for just over $40 per ounce. On a downside breakout, the trade could be exited for a reasonable loss. If the market continues to the upside, the money spent on the put would be recovered if gold moves above $995, and seeing as an upside breakout of this pattern calls for a $130 move in the direction of the break, the objective would be $1100 per ounce. Your upside potential will easily outstrip the cost of the put option in this scenario.
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
Fax 949 488 7625
-- Posted Monday, 24 August 2009 | Digg This Article | Source: GoldSeek.com
