Overnight, China imposed tariffs on 106 U.S. products and markets across the globe reacted.
When the news was announced early this morning, Equity futures received a blow and the price of Gold took on new investors rallying $13 dollars.
Surprisingly there was little movement in the U S dollar. Ten Year Bond Yields all lower around the globe as investors look for alternative investments.
A trade war with China can have a significant impact on our economy, some predicting the possibility of wiping out all the benefits of the corporate and individual tax incentives. An economist appearing on CNBC this morning said he believes the best GDP figures we can expect in the next two quarters are 2.5 percent, and that might not be enough for the Fed to raise rates as predicted. All good news for the long term Gold Investor.
Gold Day Traders Find Home on the “Range”
If you remember just a short time ago, traders in many markets were complaining that without volatility it’s impossible to make any money trading.
One just had to look at the CBOE VIX Index last year when it hit historic lows. The equity market was signaling that it expected no volatility whatsoever for the months ahead. The proposed tax cuts were fueling the markets with hopes of increased corporate earnings and individual tax cuts. Our friends in Washington were telling us that these tax cuts will spur growth and offset any short fall in income taxes.
Then (to shorten my story) the news started painting a different picture of how well our economy was growing. A tariff war is considered bad news for the equity markets. The President’s tweets seem to also have a major impact on the markets. The technology stocks that were the catalysts in the markets during the so-called “Trump rally,” were now in correction mode.
Stories abound, with no solid fundamentals for the investors to sink their teeth into. So as the story goes, be careful what you wish for.
Now the CBOE VIX Index has had some hills and valleys and many individual investors are up at night hoping that one tweet or news story doesn’t have an impact on their life savings.
And then there is the lonely Gold Day Trader, watching all this action hoping someday he will have action again like we see in the Equity markets. But I have to tell you, don’t feel so sorry for him or her, believe it or not, they’re doing just fine. How you ask?
Simply put, the average Gold Day Trader had two choices:
- Leave the Gold market all together and find another product to make a living at
- Stay put and become what they call themselves now: “Range traders”
For the most part, the “Range Traders” have been upping their positions, (holding more future contracts) feeling pretty confident that the market will not break out in either direction, causing them to lose on their investment.
Current strategy I’m told is, buy in the area of $1,320 and sell in the area of $1,350. What some have shared is that all they look for is a trend either way that can secure them a gain of $ 15 dollars an ounce. With the increased volumes they have been adding to their normal positions as long as the market stays in its current trading range, they feel pretty confident that they can make good money and stay in the game.
Of course they can lose money playing inside this range, but as long as they properly put their stop loses in place, they can recover and play again on the next momentum move.
I’m sure we all would like to see the price of Gold break out and make new highs. And I still believe we will see that this year. But in the meantime the family still has to eat so we adjust our trading strategies and carry on.
The word “patience” for the long term Gold investor still applies.
Have a wonderful Wednesday.
Disclaimer: This editorial has been prepared by Walter Pehowich of Dillon Gage Metals for information and thought-provoking purposes only and does not purport to predict or forecast actual results. This editorial opinion is not to be construed as investment advice or as a recommendation regarding any particular security, commodity or course of action. Opinions expressed herein cannot be attributable to Dillon Gage. Reasonable people may disagree about the events discussed or opinions expressed herein. In the event any of the assumptions used herein do not come to fruition, results are likely to vary substantially. It is not a solicitation or advice to make any exchange in commodities, securities or other financial instruments. 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. Dillon Gage Metals shall not have any liability for any damages of any kind whatsoever relating to this editorial. You should consult your advisers with respect to these areas. By posting this editorial, you acknowledge, understand and accept this disclaimer.