The US Dollar had a boost with the Unemployment numbers today! Analysts had forecasts in on the Non-Farm Payrolls report of 150,000, down from the previous reading of 200,000. The report came in at 243,000 new jobs created which dropped the jobless rate to 8.3 % from 8.5 %. This pointed to recovery! Recovery in the US has been all about employment and housing, the strength in one area may bolster the other. Perhaps it was the warmer winter that helped construction employment add 21,000 jobs in January and 31,000 in the previous month. Regardless, it was positive, which brings us to the next question. Will the positive data change the outlook on the Fed policy? It is thought that the extended low interest rates possibly to 2014 and the loose monetary policy may remain as is to possibly further stimulus according to many analysts. "Operation Twist" taken from the'60's' is set to last until June. This is a $400 billion stimulus program where the short-term debt instruments are sold and the long-term debt instruments are purchased to hopefully keep longer-term rates such as mortgages low. Factory orders were up by 1.1 % in December following an upwardly revised 2.2 % increase in November. Analysts expectations were for an increase of 1.5 % in comparison to the 1.8 % derived the previous month. The Institute for Supply Management reported the services sector to advance to 56.8 last month from a revised 53.0 in December. The services sector represents about a third of the economic activity within the country. Anything over a reading of 50.0 points to expansion. The new orders index was up to 59.4 from 54.6 with the measure of prices paid rising to 63.5 from a previous 62.00. The employment index portion was up to 57.4 from the previous 49.8.
The US Dollar has fallen drastically against the Euro FX as hopes of global economic stability seems within range! Finance Minister Jean-Claude Juncker, of Luxembourg, had regarded the summit of the European Union (EU) as "largely insufficient" and further spoke of the Greek negotiations as "ultra-difficult"! Greek Finance Minister Evangelos Venizelos announced that talks with private creditors on the bond swap were "one formal step away"! They now think that an accord may be reached next week. There is more convincing to be done prior to any bailout disbursement. The Euro Zone leaders must authorize the spending cuts and labor reform as suitable in order to issue the aid. The troika of foreign lenders are to submit a report of the progress in Greece, then perhaps the $130 billion euro bailout may be dispersed. The troika have implied stricter measures such as lowering the minimum monthly wage, which is currently about $750 euros and also cutting holiday bonuses. The Euro Zone leaders fear now that more money may be needed now to recapitalize the Greek banks, perhaps an additional $15 billion euros. The bond swap is difficult because banks and insurers may suffer losses of about 70 % of the Greek debt that they own.
The US Dollar has trended lower this week! The March US Dollar is technically in sell mode! The high this week has been $79.665 and the low $78.745. The usual inverse relationship between the US Dollar and Gold is intact for the moment! In times of fear and uncertainty, the safe-haven vehicles may move in tandem. In times of no fear, the safe-haven vehicles may not warrant the interest of traders. The ICE Futures U.S. Dollar Index (USDX®), is the international value of the US dollar and the world's most widely-recognized, publicly-traded currency index. By using the Dollar Index, traders can take advantage of moves in the value of the US dollar relative to a basket of world currencies or can hedge their portfolio of assets against the risk of a move in the US dollar in a single transaction. US Dollar Index futures are traded for 22 hours a day on the electronic trading platform of the Intercontinental Exchange (ICE).
Why am I elaborating on the US Dollar as a Gold Trader? While the US Dollar remains weighted against the six major currencies, Gold may be boosted by a variety of factors: It is purchased as a safe-haven by investors shifting from low interest bearing government bonds and other products that cannot keep up with the rate of inflation. The Gold may be traded in physical bullion, ETF's, XAU, Spider Gold Trust and futures contracts to name a few. Typically, in years past, the currency of a country could be backed by physical gold. The XAU has traded down. The Exchange Traded Fund (GLD) was reported lower.
The Gold Market has risen this week perhaps on Greece concerns! The US Federal Reserve vow to keep interest rates low and perhaps another potential round of monetary easing may support the Gold market. Iran had been accused of working with enriched uranium beyond the usual 3.5 % and actually to about 20 % which designates the purpose to military usage. At this level, the uranium is at weapons grade material. Sanctions have been placed on Iran by the US and the European Union as of July 1st. Since, the Iranian leader has offered to meet and talk with the NATO inspectors. At this point, US Defense Secretary Leon Panetta has concerns about Israel possibly bombing Iran to prevent the creation of a bomb from Iran. Israel is believed to have the only Middle-East arsenal to date. They have a vulnerable location and the anxiety is tremendous as Iran has managed to bury the site at Fordow about 260 feet underground. The environment is fragile and while Gold could retrace to $1680.00 technically, it may extend to new highs this year in light of any possible calamities. The speculators increased their lots by 32,573 this last week to 159,509 contracts. The significant build may look enticing, but some investors may be more apt to want to buy at $1700.00. We remain cautiously bullish.
While reaping the rewards of being a gold trader, one must be sure to use stops and money management to stay in the game! Retracements are possible. While I remain very bullish still - use stops - live to trade another day!
GOLD
The April Gold has reached a high this last week of $1765.90 and a low of $1726.20. I am in buy mode until the GCJ12 should penetrate $1720.20. The current point of control or comfort zone may be $1745.20. This market may be setting up for another leg up, but must maintain levels above $1680.00. Those who hold long positions may want to trail stops to protect any accumulated profits or prevent losses.
While I am long term bullish this market, it is essential to have a trading plan with worst-case scenarios in mind. Once you accept the risk of the trade, then all you need do is follow the plan. Intra-day trading, we do bracket our trades with precise stops. The use of stops, while prohibitive may allow an account take smaller losses during some very large market moves. To live to trade another day! The use of options with futures positions and/or option strategies may again keep the risk at a specific level. Now we may find the market potentially could climb to $2000.00 or much higher this or next year. Gold is still a Safe-Haven market that seems to hold value during most economic conditions.
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New Potential Trades and Trade Follow-up: Options may be a way of participating in the market while keeping a prescribed risk and unlimited profit potential. While it may not give you the same profit, it may allow one to stay in without being bounced out with stops.
No New potential option sample trade. The CME Group announced that they are introducing Mini Gold Kilogram contracts to meet the increased interest of investors. The smaller contracts may allow investors to participate in the Gold Market with less margin.
Due to the fluctuations in this market, please consult with your broker, or call us to strategize a risk management plan in line with your personal risk tolerance. Traders that wish to participate in the Gold Futures Markets may look at the E-Mini Gold contracts which have a lower margin requirement than that of the larger Gold contract. Please look for current margins before entering this market and be sure to allow cash cushion for any adverse conditions. Please consult with your broker to calculate the risk, stop loss orders or option strategies before entering such a volatile market. Investors that wish to take a position in the Gold Futures market should devise a plan according to their goals, risk tolerance and the amount of money they are willing to risk in this sector. Like many other investments, the success of the trading plan must take into consideration the timing of the entries and exits.
Please call or email me for the complete recommendation to coincide with your risk tolerance, so that we may apply the correct Money Management. The Weekly Gold Digger is a Free Weekly subscription to receive trading opportunities by email along with fundamental commentary and basic technical points of interest.
Take a close look and feel free to call in and talk to me in greater detail. It would be my pleasure. Good trading!
Call me at (877) 224-1952 or email me at lburton@danielstrading.com
Risk Disclosure
You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. Daniels Trading is not affiliated with nor does it endorse any trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or services.
Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.
STOP ORDERS DO NOT NECESSARILY LIMIT YOUR LOSS TO THE STOP PRICE BECAUSE STOP ORDERS, IF THE PRICE IS HIT, BECOME MARKET ORDERS AND, DEPENING ON MARKET CONDITIONS, THE ACTUAL FILL PRICE CAN BE DIFFERENT FROM THE STOP PRICE. IF A MARKET REACHED ITS DAILY PRICE FLUCTUATION LIMIT, A ‘'LIMIT MOVE'', IT MAY BE IMPOSSIBLE TO EXECUTE A STOP LOSS ORDER.
WHEN INVESTING IN THE PURCHASING OF OPTIONS, YOU MAY LOSE ALL OF THE MONEY YOU INVESTED.
