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After looking through my technicals, including Ichimoku, MA, Bollinger bands, and stochastics, I decided that there were two potential trades: –

1) Long AUDUSD; stop if offered at 0.9256 (Spot 0.9236) and SL at 0.9230

2) Long Gold, stop if offered at 1,295.00 (spot 1,283) SL at 1,275

By the following morning Singapore time, nothing happened in the AUD, so I took out the order.  Guess what, my NY session, the AUD was at 0.9280!

My Gold order was triggered and it was LIVE, I followed the market till the NY session when it reached $1,305 and I decided to take profit at $1,303 for a trading profit of $8.

The gold trade I did back in December 2013 and adding on a call option which I sold, received $30 in premiums and expiring January 30th, 2014.

Let’s recap some of the trade details; I bought gold at spot $1,232 on December 10th, 2013.  Gold steadily moved upwards from then on and I decided to sell a call option at $1,246 expiring January 30th, 2014, hoping to give myself sufficient time to ensure that the option was exercised.

While I was busy with Christmas and the New Year’s, I stopped all trading except this outstanding gold trade.  Having done the trade I was alittle nervous when gold decided to turn south towards the end of December reaching a low of $1,187 on December 20th.  It meant that I was facing a mtm of about $45 loss per kg.  Then, it started climbing up again, which was a welcome relief, however, I was beginning to think that I should have placed a stop loss level, as gold began dropping again, back down to $1,187 on December 30th.

However, since I had time and the fact that I know with a high level of confidence and comfort that whenever gold drops below $1,200, it will only be temporary and as long as I have time, I do not have to be unduly worried as the floor was established in June 2013 at $1,179.

Of course, I knew that gold was going to trade at a broader channel of between $1,200 and $1,300.  I didn’t think that it would go higher than $1,300, given that most central banks around the world has stopped increasing liquidity and if anything at all may begin to taper following the footsteps of the U.S.  So I knew the upside was somewhat capped.

Also, the fact that gold today is an asset class by itself, it would validate a fair price value of about $1,100.

From the new year onwards, gold just did a steady grinding path upwards.

On January 30th the high was during the NY session at $1,268 and the low was during the Asian session at $1,237 and since my option was expired at 10am NY time, I had the benefit of the uptick in gold prices.

The option was exercised against me, since the strike was at $1,246, so I delivered my gold at $1,246, after having bought it for $1,232 for a trading profit of $14 per kg.  However, I also benefited from the $30 per kg premium for the call option that I sold, so my total profit was $46 per kg.

Pretty good trade if I may say so, of course, with some anxiety during the past month and a half.

Last week on December 5th, I saw an opportunity based on my charts; gold appeared to have bottomed at $1,211, though the greater volume of trades was done at about $,1,219.

Recent high on November 29th/30th was about $1,254.

I am not sure whether there is enough momentum to bring it back to the last high, it’s currently trading at $1,244.

Then again, with the budget looming in January and the debt ceiling in March, maybe, it may be worth the while to hold the position.

Hmmmm………I am up $12/-, and to sell an option till January 30th, 2014 at $1,246 will give me premiums of $30/-.  Sounds like a good trade.

Done, just executed selling a call option XAUUSD at $1,246 expiring January 30th, and receiving premiums of $30/-.

I was just studying the 4H and Daily charts on gold, and everything from; Ichimoku to fast and slow stochastic is showing me that there is possibly more weakness in the gold with chance of moving back to the last low of $1,198.

Then, again what’s happening in the US may whack everything out the window.

dji and gold

The above is a chart that superimposes both the gold price graph and the Dow Jones Index.

Generally, there is a negative correlation between gold and the equity markets.

During the boom years of 2006 and 2007, look at how poorly performing gold was, and we see it again during the latter part of 2011 and this year.  Every time there is good economic data on the recovery of the economies and growth story, the price of gold will drop.

However, it is a reality today that gold is an asset class that is part of the asset allocation in an investor’s wealth portfolio.  It is no longer looked upon as a traditional hedging instrument.  It has come of his own in the past 12 years.  Today, there is a deep enough and broad enough market, that is, sufficient retail, corporate, institutional and government are and have invested in gold.

Today, it could be argued that gold is a pseudo currency, it has liquidity, it has an underlying value and it can be used in trade.  When the world is flush with liquidity and interest rates are low, confidence wanes in currencies as investors feel that the underlying value of the currency is weak, given that the global economies are weak, except for the emerging markets and Asia.

I believe the worse is over the the United States and for Euroland, there are still some bumps ahead, however, both economies have exhibited resilience and tenacity, they have turned the corner.  Now, just because they have turned the corner does not mean that the road to economic growth will not have hiccups, it will and we should expect it.

We believe the medium term 3 year outlook for gold would be that it will find a base at about $1,000/-.

Right now, institutional investors, that is, the fund managers are all selling gold or calling for a sell in gold.  The gold market is extremely bias short futures which will continue to add downward pressure to the price of gold.

What is the recommendation?

If you have gold holdings or gold ETFs, do consider rebalancing your asset allocation back to more equities.  The outlook for equities is positive and yet dangerous.

Right now, equity markets are driven and supported by liquidity and not by fundamental growth in the economy nor healthy earnings from corporates.

If the transition to a healthier economy and strong corporate earnings happen when QE is pulled back and interest rates rises, than equity markets will continue to rise.  If this transition is not handled properly, then, we may see some significant correction in the equity markets.


I have been asked to share my thoughts about gold.

I am in the midst of putting together my thoughts on this subject, however, my initial thought is that gold has carved itself out to be an asset class to be included in one’s investment portfolio, whether from a diversification point of view , reduce correlation risks, hedge against other asset classes and currency.  This trend has developed through time beginning from 2007.

You will recall that equity markets were booming into 2007 before blowing up in 2008.  In 2007, quite a number of fund managers were beginning to diversify into gold to hedge downside risks in the equity markets and also the bond markets.

When the 2008 financial crisis came, it was a real blow to the banking and financial markets………..DISTRUST stemmed from the aftermath.  Retail and corporate investors, family offices, trusts and institutional funds decided to reallocate their monies into gold while waiting for the financial markets and regulators to sort themselves out.

The financial crisis showed up the structural and policy weakness of the financial and banking sector.  It revealed the lack of governance and compliance.

Then the economic downturn took route from 2010 to 2012, and more monies went into gold as a safe haven.

Anyway, we will be putting up a more comprehensive post shortly.

Look out for it.