As Good As Gold

As we concern ourselves with the Great Unwind, Great Rotation or Great Whatever, none of us can be really trying too hard to look for investment opportunities in these times of grave uncertainty. Gold has had a decent rebound in the past 2 weeks and market chatter is starting to re-emerge.

Peaking at 1433 on the 28th of August, we are now sitting at 1390 this morning, on the first trading day of September.

The more interesting discovery is that gross speculative positions have risen to a new peak for the year, claiming over 30% of total market open interest as of 20 Aug even as the total market interest wanes. (Notice the green line in the chart below indicating Gross Position as a percentage of total open interest)

In the past week, we had the bulls find their voice again.

“billionaire investor Jim Rogers, who’s usually bullish on commodities, expects higher prices for gold, but The Gloom, Boom & Doom Report’s Marc Faber said he does too.”

“Respected Citigroup strategist Tom Fitzpatrick said in a telephone interview from New York with Bloomberg that gold and silver should surge in the coming years as the precious metals continue to benefit from the easy monetary policies adopted by central banks.
… Fitzpatrick elaborated on why he believes gold could reach $US3,500”

“Gold Will Climb To $10,000 When The Correction Comes, Says Soc Gen Edwards”

My target last week was for 1,425 which was nicely broken (high was 1,433.73). A massive correction on month end which nobody questioned came about, as I had suspected.

The 50 day moving average is starting to turn up though not crossing the 100 day m.a.. There is reason to believe that the 100 day m.a. will be the support now at 1357 for an uptrend in the near future towards the next resistance at 1485.

I confess, I had never traded Gold in this manner before. Yet it has been quite successful of late which has only convinced me that we do not have to think too hard about the situation when the market positioning shows we are up against a bunch of muscled brain battling rams.

No sense in being too cerebral about this trade. An apt quote from the Marketwatch article above says, ‘When you’re one step ahead of the crowd you’re a genius. When you’re two steps ahead, you’re a crackpot’.

I will be looking for 1360 to put on a medium term long position for the medium/longer term target of 1485. The intraday trade would be to bet that 1400 will not be broken as the “muscles” work it lower aided by the Indian government continues to raise margins on gold futures, quite forgetting that it is Diwali on 2 Nov and nobody dares to sell before Diwali (which is the pain trade and thus, our buying opportunity at 1360) !

Good luck !