Gold Price - Where is it heading?

[barrett]

On my hand written/drawn gold chart that is now mostly round my office wall I notice that the hammers (as we had overnight) when in the shadow of a previous down candle the tail usually points the direction of the next move.

Hi Explod, I guess we're looking at the same data (daily candles) but I'm actually tending to see the reverse, ie long lower-tailed daily hammers like yesterday's mostly pointing the way up.. only time will tell.
I just have bad memories of several major bottoms late last year when these daily hammers occurred under major trendlines and I falsely called a breakout nearly every time.. and those usually turned out to be the bottoms as RS has pointed out.

The triangle bottom seems to fit in at the bottom of a potential W5... abc only rough targets of course and red wedge same as in last chart, cheers

 

[barrett]

Yep, but the most telling indicator is the US$ index, which since its fall in march below 73.7 it has now after the last few days failed on six attempts to breach this resistance. It is now looking like a long pennant which must break one way or the other soon.

I see what you mean Explod, this is more a dollar thing than a gold thing...
Will be interesting to see what happens at the top of this wedge..

 

[Sean K]

closing @881 on the persistent selling, will buy back in if a bottom is formed

Golly, hoped you jumped back in barret. Wouldn't have wanted to be short term short right now. Golly x 2.

Mid to long term is the question I suppose. Does Oil/USD/Geopolitics conspire for the next leg up, or do they conspire to send it further down?

Or, perhaps the events and fundamentals don't matter?

Well done to anyone seeing a short leg up anyway.

 

[explod]

Or, perhaps the events and fundamentals don't matter?

Depends on who's fundamentals you believe, what I know to be TRUE works for me.

It is all about money Sam and gold is a currency with value. I know that the US dollar has no value anymore so it is a no brainer for me.

I notice that this thread comes under commodities which is missleading when it is so important to understand that there is a clear distiction.

It is the foundation stone of financials going back 5,000 years.

 

[Uncle Festivus]

Or, perhaps the events and fundamentals don't matter?

I think the fundamentals matter more now than at any other time. Perhaps it's the technicals that are becoming harder to interpret because we are faced with a coming series of events that have no precedence in living memory, not that I was around in 1929 .

We need the last disconnection from oil to set the base for the golden Powerball to drop .

Still, a bit premature to get excited yet as the funds whipsaw will move hard asset prices around violently until the best hard asset is left standing alone and at record highs?

Nearly time?

 

[cuttlefish]

Well this is certainly getting interesting. All looks very positive for the gold price over the medium term (i.e. next few months) imo though of course I'd expect short term volatility in gold, oil, USD and the Dow will be the order of the day as the varying forces compete for control. We might be about to see the beginning of the end of the USD which means the potential for all hell to break loose with both oil and gold prices.

Unfortunately I'm only in gold stocks and energy (oil and coal) stocks and don't hold physical gold or futures, so I expect these stocks will suffer quite a bit with the exodus to cash in the short term on the Dow moves.

Heavy falls in our local markets could see some very good bargains appear in the junior oil and gold producer end of the market. A physical gold holding is looking like a good idea to me at the moment though as well - mayber its time.

 

[MRC & Co]

Unfortunately I'm only in gold stocks and energy (oil and coal) stocks and don't hold physical gold or futures, so I expect these stocks will suffer quite a bit with the exodus to cash in the short term on the Dow moves.

Exactly why I have moved mainly towards futures for gold and oil plays. Stuck in a catch 22 otherwise.

On another note, I hope nobody fell asleep on their shorts, a 3am stary eyed surprise wouldn't have been too enjoyable!

 

[Trembling Hand]

These futures contracts are getting so big (oil, gold etc) I'm not sure how the average punter can incorporate them in their holdings.

 

[cuttlefish]

I've never traded futures but I thought you only needed to lodge about $10k margin to trade an oil contract for example.

I'm still wary of counterparty risk in the futures and other derivatives markets in the case of a market meltdown. At least with stock purchases you theoretically have secure title once settlement has occurred and thus no dependency on the financial health of the other players, the brokers or the exchange. With futures I don't believe that is the case - the failure of a major player could have a domino effect.

 

[cuttlefish]

Thats not to say I wouldn't consider using them as a subset of an overall portfolio - I just couldn't see them becoming the main game.

 

[Trembling Hand]

I've never traded futures but I thought you only needed to lodge about $10k margin to trade an oil contract for example.

Margin means nothing!!! Never has, never should. Its the size of the move that I am talking about. RISK, RISK, RISK. Which at 50 oz Gold mini contract being the smallest contract for gold and 500 barrels for the mini oil contract how can anyone with less than $250,000 account trade them long term. The move last night in oil mini was worth $5375. If you are a long term holder how can you possibly manage probable risk with these overnight with a small account?

I'm still wary of counterparty risk in the futures and other derivatives markets in the case of a market meltdown. At least with stock purchases you theoretically have secure title once settlement has occurred and thus no dependency on the financial health of the other players, the brokers or the exchange. With futures I don't believe that is the case - the failure of a major player could have a domino effect.

That is a statement in Bias not fact.
Does the ASX guarantee your company? Futures exchanges guarantee your futures.
Or does the ASX Guarantee that the financial info you base you investment decisions on that company directors feed you is 100% truthful.
How many companies go broke each year on the ASX. Stacks.
How many Futures go broke?? None!!

I would say stocks have much larger risk from not only the other side but the actual product (companies)

 

[>Apocalypto<]

That is a statement in Bias not fact.
Does the ASX guarantee your company? Futures exchanges guarantee your futures.
Or does the ASX Guarantee that the financial info you base you investment decisions on that company directors feed you is 100% truthful.
How many companies go broke each year on the ASX. Stacks.
How many Futures go broke?? None!!

I would say stocks have much larger risk from not only the other side but the actual product (companies)

Great Post TH.

So true, that's fantastic!

 

[wayneL]

Great Post TH.

So true, that's fantastic!

Yes. There is an unreasonable fear of futures.

But I think this part of the quote is more important and highlights why:

Margin means nothing!!! Never has, never should. Its the size of the move that I am talking about. RISK, RISK, RISK. Which at 50 oz Gold mini contract being the smallest contract for gold and 500 barrels for the mini oil contract how can anyone with less than $250,000 account trade them long term. The move last night in oil mini was worth $5375. If you are a long term holder how can you possibly manage probable risk with these overnight with a small account?

Considering the face value of the contract, ratrher than margin, ameliorates that fear, providing the trader knows about money management.
Cheers

 

[IFocus]

I've never traded futures but I thought you only needed to lodge about $10k margin to trade an oil contract for example.

I'm still wary of counterparty risk in the futures and other derivatives markets in the case of a market meltdown. At least with stock purchases you theoretically have secure title once settlement has occurred and thus no dependency on the financial health of the other players, the brokers or the exchange. With futures I don't believe that is the case - the failure of a major player could have a domino effect.

Cuttlefish if you are uncomfortable with futures there are plenty of ETF's listed in the US with high liquidity a summary list below from Leavitt Brothers

Look up USO follows the oil price there have been some great setups to go long


http://rs6.net/tn.jsp?e=001xuB3RZh5...Yes8UUeYWarlRoTYROXSdwIe7U7lsFzuaSHOqqnf6LxZQ

 

[golfmos123]

Please excuse my ignorance, but with oil spiking up strongly, are we expecting POG to rise, or oil to fall having overshot???

If a POG rise is the concensus, then do people expect the usual gold stocks to be spiking this coming week?? ie NCM, LGL, OXR and others......

 

[barrett]

Hi Kennas I did jump back in late Friday for a scalp, what a night.. still long, I would have done better just to hold that original position though. It looks like fairly strong horizontal resistance around 904, would buy more on a break through there, for a move to resistance at 111 and 114? Then looking for ST target at the top of the wedge, 920, at this stage..
Goldmos, better wait for gold/oil action tonight..
Huge call from Cuttlefish, bullish for the next couple of months!
Last Thursday's trendline reversals in gold and silver do look bullish to me, for today and tomorrow at least, I think...

 

[RobinHood]

RISK, RISK, RISK. Which at 50 oz Gold mini contract being the smallest contract for gold

...

CBOT offers 33.2 oz. 10c a tick per oz. If your trading on short-term basis with very tight stops this is solid (for the adventurous bunch with $20k or so).

 

[cuttlefish]

Margin means nothing!!! Never has, never should. Its the size of the move that I am talking about. RISK, RISK, RISK. Which at 50 oz Gold mini contract being the smallest contract for gold and 500 barrels for the mini oil contract how can anyone with less than $250,000 account trade them long term. The move last night in oil mini was worth $5375. If you are a long term holder how can you possibly manage probable risk with these overnight with a small account?

Ok I see what you are saying and agree with it. If working on 2% capital risk on a trade then you are correct that an account would need to be $250k to be able to risk a $5000 overnight move. And $250k is probably a little larger than the typical 'punters' trading account.

That is a statement in Bias not fact.
Does the ASX guarantee your company? Futures exchanges guarantee your futures.
Or does the ASX Guarantee that the financial info you base you investment decisions on that company directors feed you is 100% truthful.
How many companies go broke each year on the ASX. Stacks.
How many Futures go broke?? None!!

I would say stocks have much larger risk from not only the other side but the actual product (companies)

I understand your point, I guess they are different kinds of risks. I see counterparty risk with all derivatives because they are not a direct holding in a commodity or a company, but a contract between two trading parties. But of course this is just one type of risk and all investment classes have various kinds of risk associated with them.

 

[Trembling Hand]

...

CBOT offers 33.2 oz. 10c a tick per oz. If your trading on short-term basis with very tight stops this is solid (for the adventurous bunch with $20k or so).

LOL. I always thought that was 50 oz . But still with $25 to $30 moves possible in just one day you would still need a BIG account to manage theses things on a long term basis. Short term no prob.

I understand your point, I guess they are different kinds of risks. I see counterparty risk with all derivatives because they are not a direct holding in a commodity or a company, but a contract between two trading parties. But of course this is just one type of risk and all investment classes have various kinds of risk associated with them.

Actual they are not between two parties. OTC derivatives are just that and as we have all seen are explosive. BUT you shouldn't be putting exchange listed futures anywhere near OTC. Exchange listed ARE guaranteed by the exchange AND manged with margin by the brokers. there is actually 5 parties involved.
2 traders, 2 brokers with audited live & daily mark to liquid market capital requirements and an insured exchange.

 

[cuttlefish]

BUT you shouldn't be putting exchange listed futures anywhere near OTC. Exchange listed ARE guaranteed by the exchange AND manged with margin by the brokers. there is actually 5 parties involved.
2 traders, 2 brokers with audited live & daily mark to liquid market capital requirements and an insured exchange.

Thanks for the extra info. I can see where you're coming from and accept the clarification on distinguishing between OTC derivatives and listed futures. I don't dispute that its a well regulated market, and the mark to market margin requirement does go some way to mitigating the risk. But an extreme move in oil, gold or the USD could still blow all of that risk mitigation away imo.

The scenario I describe is arguably highly unlikely but it is not impossible, particularly if you have a very negative view on the ultimate direction of the USD.