The Gold market has been extremely CHOPPY and thin lately. It appears the Gold community is very tentative and un-willing to trust the Geo-political and economic climate at the present time. It certainly is understandable considering the strength and record levels of the Stock Market.
I believe the Gold is trading in a direct relationship with the U.S. Dollar. As we are aware the Gold is considered to be “ANTI” Dollar (currencies in general) and for the most part trades in opposition to the U.S. Dollar.
Most professional traders I speak with feel the U.S economy is not as good as believed. They cite record foreclosures; rising energy prices, and concerns Geo-politically as reasons. Normally the Gold trading community would be buying Gold with both hands. However, the Gold market has rallied to the $700.00 level and met resistance several times causing professional and public investors alike to get HAMMERED. But just as importantly to note it has also shaken the Gold trader’s confidence during Gold rallies.
I still believe it will take strong Geo-political or economic news to rally and sustain the $700 level. My opinion is Gold will seek higher levels and the Gold community being the patient traders they are will be getting long using Bull call, Inter market spreads, and other option strategies while avoiding long term naked long positions.
This should be a lesson to all us Gold traders. When market climates change we must adapt with them. We need to get more disciplined with our strategies and pick our spots. Until the world and it’s volume return to Gold. Because at this present time the Stock Market is the traders choice.
Traders who have been around awhile learn to adapt and understand all markets go through cycles of being HOT and COLD. The trick is to stay patient and use your guidelines, research, and experience to make it work for you.
Good trading!
Mike Daly
Senior Commodity Broker
Manduca Trading, LLC