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Ira Epstein's Weekly Metal Report



-- Posted Thursday, 13 June 2013 | | Disqus

Commentary

Come June 19th the marketplace is going to get a better idea as to what the Fed is considering, if anything, in terms of tapering back of QE. I’m in the camp that doesn’t see the need for the Fed to taper given current economic data. Unemployment went up to 7.6%. Inflationary pressures are not evident. Jobless claims seem stuck going sideways. 

Whether you realize it or not, the Fed has handed over its leadership in the past 4 or so weeks to the marketplace. I know some will disagree since the Fed is continuing to buy $85 billion a month of US treasuries a month, but rates have been going steadily higher due in large part to the ever present press talking about what happens when the Fed tapers back. Futures markets are forward looking and often discount events before they happen. By having Fed governors in speeches say yes or no to tapering back QE, a certain amount of QE tapering is already being discounted.

 

Higher comparative interest rates often support a currency, but not all the time. When everything is even, it’s natural to favor a higher paying interest rate country than a lower rate paying one. However things aren’t “even”. Japan’s currency is soaring because the Bank of Japan is being too conservative in its approach to creating inflation. They need to get be much more aggressive by keeping their foot on the pedal if they’re going to turn around decades of deflation. They blew it this week and are being punished by the markets for it.

 

Gold has seen a lower Dollar versus the Yen, Eurocurrency and British Pound over the past month. Typically a lower Dollar is bullish gold. Stock indices have sold off enough for traders like to declare the “Sell May go away” theme in place in stock indices. Yet, gold is going nowhere. Gold’s basically been trading sideways and the in the process has seen its current trading range narrow rather dramatically. If you put the Bollinger Band Study on a chart of August Gold, you can view the trading range.

 

 

Daily Chart with just Bollinger Bands

 

 

 

As you can see, price action is going sideways with the market caught up in a 1415 down to 1365 price level. When this type of pattern develops, it’s not uncommon for prices to get “choppy, bouncing between the Bollinger Bands and going basically nowhere. The longer this goes on, the larger the move once prices start pushing against one the bands, forcing this pattern to basically explode outward.

 

One way to play for this is to purchase a “straddle” which means buying a Put and buying a Call. The idea here is that when the market breaks out you will make more than you lose on the side the market doesn’t break out on. This strategy if new to you requires some broker’s assistance.

 

Seasonal Gold Chart

 

 

 

Lending more credence to my overall bearish take on gold is the historically speaking, go has displayed a weak tone in June and early July. While past history is not a guide for the future, it is important enough to pay to attention to as it offers some insight into future demand. Being summer, demand in some markets tends to taper off, which is what gold has been seeing. I read recently that some ETFs now have holdings at their lowest levels since 2009.

 

Summary

 

I am not in the bull camp. If anything I am in the neutral to bearish camp looking to jump into gold when it starts breaking out of its sideways action. If that turns out to be bullish, so be it, but I don’t think it will be.

Instead of getting caught up in sideways, churning market, why not employ an option strategy whereby you purchase a Call and purchase a Put. Once gold starts a directional traded, you lift the side that is not with the trend and see how far the option moves. More sophisticated traders might even write a Call or Put once they see which way the breakout moves to lock collect some funds against their bullish or bearish position.

Either way, you can call your Ira Epstein Representative for more information at 1 888 973 2077 who can help by explaining this strategy.

To receive my specific trade recommendations, you should consider becoming a subscriber to my Market Information. It’s inexpensive and includes a lot of market research. 

To become as subscriber, simply click on the link below or type this link into your web browser:

http://www.iraepstein.com/client-non-client.html

 

 

Disclaimer: This publication is strictly the opinion of its writer and is intended solely for informative purposes and is not to be construed, under any circumstances, by implication or otherwise, as an offer to sell or a solicitation to buy or trade in any commodities or securities herein named. Information is taken from sources believed to be reliable, but is in no way guaranteed. Chart data is courtesy of LGP-IraCharts. No guarantee of any kind is implied or possible where projections of future conditions are attempted. Futures and Options on Futures trading involve risk. In no event should the content of this market letter be construed as an express or implied promise, guarantee or implication by or from The Ira Epstein Division of The Linn Group, Inc. or The Linn Group, Inc. that you will profit or that losses can or will be limited in any manner whatsoever. No such promises, guarantees or implications are given. Past results are not indicative of future performance.


-- Posted Thursday, 13 June 2013 | Digg This Article | Source: GoldSeek.com

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