How does one gage (no pun intended) the future movement in the price of gold? My best answer would be: by researching all aspects of the gold market each and every day; speaking to many different people, from traders around the globe, to folks at the Mints, refiners and dealers; listening to what the FED policy makers have to say and watching worldwide currency activity.
I’m always being asked, “What do you think the price of gold will do in the short term and for the year?” As in any market, trying to calculate the move in the next five minutes is always a challenge, if not impossible. And at times there will be conflicting information making it very difficult to put together a strategy.
Nonetheless, I find the most important factor in finding future movement in the price of gold is market trends, or in other words factors that create momentum.
Whether technical or fundamental (my favorite), there are different signs that indicate a possible direction. Two things stick out today. As I indicated in my previous comments, for almost two weeks now gold ETF holdings have continued their trend in increasing holdings each day. Another factor I found was option related: August $1,175 gold calls traded $26 dollars last week. Both are bullish indictors and as we all know there are NO guarantees.
No crystal balls, no magic wands. So we use the tools I indicated to TRY to determine a direction. Using these tools can provide invaluable insight that can add value to any conversation with any client.
At the time of this report, we witness a weaker dollar, lower crude prices and equities in negative territory. Gold is catching a bid here and at some point I believe that if this rally continues, some of the Wall Street traders will have to cover their short positions.
As we all know life is a gamble and trading precious metals is no different. But with a solid education and using the proper tools, your odds can improve.(Sounds like a fathers speech before sending a kid out to college.)
Have a wonderful Monday.
Disclaimer: This editorial has been prepared by Walter Pehowich of Dillon Gage Metals. This document is for information and thought-provoking purposes only and does not purport to predict or forecast actual results. It is not, and should not be regarded as investment advice or as a recommendation regarding any particular security, commodity or course of action. Opinions expressed herein are current opinions as of the date appearing in this editorial only and are subject to change without notice and cannot be attributable to Dillon Gage. Reasonable people may disagree about the opinions expressed herein. In the event any of the assumptions used herein do not come to fruition, results are likely to vary substantially. All investments entail risks. There is no guarantee that investment strategies will achieve the desired results under all market conditions and each investor should evaluate its ability to invest for a long term especially during periods of a market downturn. No part of this editorial may be reproduced in any manner, in whole or in part, without the prior written permission of Dillon Gage Metals. This information is provided with the understanding that with respect to the opinions provided herein, that you will make your own independent decision with respect to any course of action in connection herewith and as to whether such course of action is appropriate or proper based on your own judgment, and that you are capable of understanding and assessing the merits of a course of action. You may not rely on the statements contained herein. Dillon Gage Metals shall not have any liability for any damages of any kind whatsoever relating to this editorial. You should consult your advisors with respect to these areas. By posting this editorial, you acknowledge, understand and accept this disclaimer.