The Indecisive Gold Market
June 2007
Any trader can tell you that playing gold futures on the bullish side in the past couple of months has required a savvy approach (or fairly strong stomach!) as this market hasn't been cooperating with buyers. The yellow metal has seen its price drop more than 7 percent since peaking above $690 an ounce in mid-April. Market watchers are blaming factors such as recent strength in the U.S. dollar, which tends to move conversely to gold, as well as more attractive returns in Treasury instruments driving investor dollars away from metals. When can we expect the market regain its footing without these drastic pullbacks we've been seeing? When will gold stage an aggressive move to the upside and break to new highs?
No one really knows the answers to those questions, of course. But there are some technical tools you can use to help formulate a trading strategy. At the most basic level, I am looking for a solid base of support to come into place before I become convinced the tide may be turning in this market. I am watching support in the August COMEX futures contract in the $647 – $645 area (near the low on March 5) as a possible turning point that will attract buyers, and mark a volatile turn to the upside. I feel the best way to capitalize on the move would be to catch the market when it hits that support point, and try to build a position around that. There are various futures and options strategies you can consider depending on your account and risk tolerance—it's up to you. If you choose to use options, you should look to act fairly quickly if you see that support hold, to catch the potential move higher. Otherwise, you can trade futures and possibly see a little fluctuation in prices before you get on a strong move to the upside.
This market has been making some notable moves in the past few days, so I am hesitant to recommend a more specific trade at this time. Please feel free to contact me to tailor a trading strategy for your particular needs.
Tim Haberkorn is a Senior Market Strategist with Lind-Plus, Lind-Waldock's broker-assisted division. You can contact him at 888-801-9302 or via email at thaberkorn@lind-waldock.com.
Kristina Zurla Landgraf is editor of Lind eWire. She can be reached by email at editor@lind-waldock.com.
Futures trading involves substantial risk of loss and is not suitable for all investors.
Past performance is not necessarily indicative of future trading results. Trading advice is based on information taken from trade and statistical services and other sources which Lind-Waldock believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder.
© 2007 Lind-Waldock, a division of Man Financial Inc. All Rights Reserved.
