Gold ends off record top on investment fund buying

By: Adam Schulman

DiamondMkt.com – Reuters – NEW YORK/LONDON - Gold prices ended higher on Thursday but off a record peak earlier in the session as strong buying by investment funds more than offset news that central banks could be withdrawing liquidity from the financial system.

Bullion has gained nearly 40 percent year to date, driven by a combination of central bank buying, paper currency depreciation and inflation worries.

Andrew Montano, a director of Toronto-based bullion dealer ScotiaMocatta, said that investment flows into the gold market are driving prices to record highs.

“Physical gold continues to be piling up in vaults. There is a lot of metal built up in vaults owned by exchange traded funds as well as private funds,” Montano said.

Spot gold was volatile, hitting a record high of $1 226,10 an ounce, before falling as low as $1 203,90. It was at $1 216,95 at 3:03 p.m. EST (2003 GMT), versus $1 215,90 late on Wednesday.

US February gold futures settled up $5,30 at $1 218,30 an ounce on the COMEX division of NYMEX.

Gold has rallied as governments flooded the system with money to jolt the economy out of recession. However, markets on Thursday are rattled by signs that central banks could be tightening money supply, traders said.

New York Federal Reserve on Thursday conducted a small reverse repurchase agreement transaction to test the cash-draining tool. Dealers said that was seen as the Fed testing the water of liquidity withdrawal.

Also, ECB President Jean-Claude Trichet laid out a package of decisions on ending and tightening up liquidity.

Late in the sessions, gold turned higher as the dollar weakened against the euro following Trichet’s comments on possible exit strategies from quantitative easing.

Saxo Bank senior manager Ole Hansen said a raft of factors, including central bank buying and fears over the currency markets, were supporting gold. He said the metal was ignoring its usual technical indicators as it moves further above previous record levels.

“We are into new territory every time we make new highs,” said Hansen. “It is easy to break up a percent, because there are no levels to look for as resistance.”

Goldman Sachs said it sees prices at an average $1 265 an ounce in 2010, rising to $1 425 an ounce in 2011. It said low U.S. interest rates will support gold.

A poll of 33 analysts, traders and funds conducted by Reuters this week found most believe gold prices are in for a correction before the end of the year, though the precious metal’s bull run is still believed to be intact.

GOLD HITS HIGHS IN EURO, POUNDS

Gold hit record highs in euro and sterling terms as well as in the dollar. Euro-priced gold reached a peak of 812,43 euros an ounce, while gold denominated in sterling hit a high of 735.28 pounds an ounce.

Among other precious metals, silver was at $19,08 an ounce against $19,20.

Spot platinum was at $1 490,50 an ounce against $1 500,50, while palladium was at $383,50 versus
$387,50.

About the Author

Adam Schulman is a partner at Fusion Alternatives and Diamondmkt.com. With many years experience in the diamond industry spanning the entire spectrum of the diamond pipeline with multiple trading avenues on both the buy and sell side, Adam Schulman is one of a few experts in the world who has the expertise to provide unique diamond research and investment services in the emerging investment diamond market.
Previously at the Rapaport Group – the leading service and trading provider to the global diamond industry he was responsible for the international wholesale trading department of Rapaport encompassing both online and traditional diamond trading operations. The Rapaport Group manages both the Rapnet and Index online diamond trading platforms which are the leading ‘screen trading’ platforms for polished diamonds with daily listings of over 300,000 diamonds worth over $2.5 billion.
Adam may be contacted at info@diamondmkt.com or www.diamondmkt.com

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Good Business is What Gold Business

By: Bud Blair

At one time, if you were to have asked a broker whether or not gold was a good investment, you would receive a tepid response. This is because gold was traditionally considered a high risk investment that came with little reward. But, that was a long time ago. Over the past several years, gold has increased $700 or more per ounce. Those that invested in gold have earned huge returns. Yes, gold has made a comeback and has proven it can be a good investment in both good and bad economic times.

In fact, there is so much confidence in gold investing that many are hedging their portfolios with gold. For some, this has turned out to be a wise investment money as gold has carefully hedged the portfolio against losses in the market. Unfortunately, some have taken this to mean that gold is a non-risk hedge investment. This is most certainly not the case since gold – like all commodities – comes with a great deal of risk. In the recent past, however, it has come with far more rewards than losses.

Future Trading

Those that truly want to place their bets with gold investing could explore the very volatile and high risk realms of gold futures and options. This is one of the most speculative means in which one could invest. Essentially, you will be agreeing to buy gold at a predetermined price. When the time comes to make the purchase, you will either acquire it for far less than the market value or you will pay a far greater price for it. One yields huge rewards and one could lead to major losses. However, this mode of investing works in both good and bad economies.

Gold as a commodity can be risky because it is often not subject to the same supply and demand factors of other commodities. Oil, for example, is clearly more in demand than gold since oil is used to produce electricity. As such, it becomes much more difficult to make predictions in the realm of gold futures. Those that have made good predictions have experienced some significant earnings.

Basic Investing

For those looking for the simplest strategy for investing in gold, then the best advice to be given is to treat gold in a manner no different than you would treat a blue chip stock. That is, you can purchase today and hold onto it for a long term investment. As previously mentioned, gold has increased over the years roughly $700 an ounce. Many people earned enormous revenues from this simply buying gold and not selling it. Now, their portfolio is doing quite well thanks to the inclusion of gold. Of course, you could also sell it for a hefty profit if you wished to as well.

Those looking for a solid new investment strategy in good times and bad should simply explore their options with the old standby: gold. It is safer than some assume and it has proven to possess a viable investment track record.

About the Author

Bud Blair founded Gold Tree Online, the leading site to ” target=”_blank”>www.goldtreeonline.com/”> sell scrap gold online and exchange ” target=”_blank”>www.goldtreeonline.com/how.htm”> cash for gold . They help you ” target=”_blank”>www.goldtreeonline.com/what_we_pay.htm”> trade your old broken jewelry, rings and coins for cash in a safe and secure environment.

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Gold at a Monthly Crossroads – Which Way Now ?

By: Chris Vermeulen

Gold traders and investors have been waiting for a clean break above Gold’s nominal all-time high, recorded back in March 2008, but the process has been anything but sure and swift.

Having risen approximately 300% since the start of its bull run in 2001, Gold has far outpaced the investment gains in virtually every other investment class, including stocks, bonds, real estate and cash. Gold bugs feel certain that this time will be the ‘big one,’ and that the precious metal will likely hit $2,000 – $3,000 an ounce, if not higher. Commodity experts like Jim Rogers also believe that Gold will continue to surge higher, right along with most energy, food and base metal commodities; in fact, some believe that the bull run in commodities still has another 5 –10 years to run higher, given the tremendous demand from developing economies for massive amounts of raw materials. And certainly, the tremendous amounts of deficit spending being seen in nations across the globe have also caused many investors to flee to the perceived safety of Gold as a first-class inflation hedge. So, there are plenty of fundamental reasons for Gold to continue to march higher over the next few years, no argument there. But what about the technicals on the charts- what are they telling us right now? Are there sound technical reasons why traders and investors should prepare to buy more gold on a confirmed breakout above the March 2008 high – or not? Let’s have a look at the long-term chart of cash Gold and see what the monthly price bars are telegraphing to us.

There is no doubt about the long-term nature of this uptrend in Gold – it’s very much intact, with a current price far above both its 20 and 50-month exponential moving averages (which are also maintaining a healthy degree of spread between themselves, even as they continue to slope upward), an Aroon (14) trend intensity indicator that has recently swung to the extreme bullish end of its range, and a Metastock CS Scientific expert advisor (see gray ribbon at bottom of chart) that is also confirming the presence of a strongly trending move. There is, however, one glaringly negative technical clue on this chart, and that is the current state of the RSI (14) indicator, one that is exhibiting an unusually bearish amount of negative price-momentum divergence. Even though Gold actually set a new cash high before pulling back intra-month (in September 2009), the RSI (14) failed to confirm the new high, and this should be something that every Gold trader and investor needs to be aware of. Even with that little ‘bugaboo,’ this chart has an undeniably bullish posture, attitude, presence; whatever you care to label it with; by all account this looks like a commodity ready to make a substantial break to higher levels – if not now, then in the coming months.

There are a couple of other factors we need to consider here, as they factor directly into the decision-making processes of those considering long entries in Gold now; the first of these is what is known as the ‘seasonal’ pattern in Gold. Gold has a well-documented track record of achieving its highest annual prices in the latter months of each calendar year, and this year may be no exception. There is a little issue here, as well; Gold is usually weak in October, tending to back off from the gains made in previous months. Sometimes it just moves sideways during early November before surging strongly throughout the second half of November and all the way on through December. If this seasonal factor is ‘in the groove,’ so to speak, this year, then we may very well see a bit of a pullback in Gold for the next 4-5 weeks.

The other fundamental factor has to do with the current investment posture of the so-called ‘Large Traders’ (aka: hedge funds), the ‘Commercial’ traders and the ‘Speculative’ traders, ranked according to their respective commitments to the long side of the Gold futures market. The latest COT figures indicate that the Large Traders are almost completely committed to the long side of this market, even as the deep-pocketed Commercial interests are only marginally long. The small-fry traders of the futures industry – the ‘Small Traders’ are also substantially committed to the long side. To better understand these commitment biases, you must first understand that the Commercial interests generally do the bulk of their buying only after Gold sells off. They buy more and more as it falls, in effect ‘scaling in’ to their positions over time. The Large Traders generally use trend-following methods to initiate trades, so they normally buy on signs of increasing upward momentum. Guess who is selling them their Gold? You got it – the Commercial interests feed it to them all the way up. Small Traders are all over the place at times, but usually seem to ride on the coattails of the Large Traders. The current COT structure does seem to imply a short-term Gold sell-off is due, based on the overly lopsided commitments among the various market participants listed above.

Putting all of this technical and fundamental information together, here are some general conclusions we can arrive at concerning Gold:

1. 1.)   Gold is very likely to sell off in October, due to the pronounced negative price-momentum divergence on the monthly chart and because of the lopsided, overly bullish bias of Hedge funds on the long side of the Gold futures market. Working together with these factors is the overwhelming (for more than 30 years) tendency of Gold to weaken during the month of October.

1. 2.)   Gold, after a period of weakness in October, has a very good probability of rising strongly through the remainder of 2009, possibly even making a clean monthly close above the March 2008 cash Gold price of $1,011.25. The year 2010 may also see further gains in the yellow metal, as the quarterly price cycles (not shown) have just completed a bullish crossover, confirming the likelihood of substantial gains yet to be made for Gold in the years ahead.

Summing up, the balance of 2009 should be a very exciting and memorable period for Gold traders and investors. With the charts and other fundamental factors providing us with insight, we have the tools we need to be ready for whatever this unique commodity market may send our way. Join my Free Trading Group at www.ETFTradingPartner.com

Mark Brown

Disclaimer: I currently own gold bullion

About the Author

Mark Brown is an independent trader who focuses on trading
ETF funds. He has been involved in markets and money management since 1998. His
unique trading model which uses a combination of analysis like: economy, market
cycles, chart patterns, volume, market internals, and money management.
Visit his site: ETF Trading Partner http://www.ETFTradingPartner.com/

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Introduction to Futures

By: Les Jones

I am frequently asked why a person would want to trade futures. I can think of numerous reasons. However it all boils down to hedging or speculating.

For those of you who are not aware of the futures market, a futures contract is an agreement between two people. The purchaser of the contract agrees to take delivery of a standardized amount of a commodity at a specific price and by a specific date. The standardized commodity might be corn, gold or a basket full of stocks. The seller of the contract agrees to make delivery of a standardized amount of a commodity, at a specific price and by a specific date.

Hedgers are people who are attempting to protect themselves. For instance, farmers producing a crop might consider selling a futures contract to lock in a price for their crop. A plastics manufacturer fearful that the price of petroleum might trade higher might consider purchasing crude oil futures as a way to partially hedge his costs for raw materials. Or mortgage bankers, concerned that interest rates might decline might consider buying 30-year treasury bond futures. The futures markets have many products and contracts that might offer users and producers protection from price swings in the cash markets.

People who anticipate a price swing in the markets and attempt to profit from it through the purchase or sale of futures contracts or options on those contracts would be speculators. For example, a person who thinks that inflation is rearing its ugly head might consider buying gold futures. A person who feels that the stock market is too high or too low might consider buying or selling any one of a number of stock index futures. The futures markets offer an e-mini S&P, an e-mini Dow Jones and an e-mini NASDAQ futures contracts just to name a few. The “e” in e-mini denotes that the contract is electronically traded on the internet. The “mini” in e-mini denotes that the contract is a smaller contract than the full size contract and consequently it might have a smaller margin. Traders should also note that there is a “mini” contract without the “e” that is pit traded as is the case for instance with the mini grains.

One of the main reasons people trade futures is leverage. Futures contracts are bought and sold on margin. Traders are able to control a large amount of a commodity or cash instrument with a comparatively small amount of capital. Margins are determined by the futures exchanges. They look at the size of the contract, the volatility of the market and other things to try to determine the risk involved. Margins may rise and fall as the volatility increase or decreases.

When a trader buys or sells a futures contract, they are required to put up the “initial margin” by the close of business. The following day the margin will revert to the “maintenance margin”. As the price of a futures contract rises and falls, profits and losses are added or subtracted from a traders account at the close of business. This is called “marked to market”. If a traders account balance drops below the “maintenance margin” level, at the close of business, then the trader is issued a “margin call”. At that point the trader has to decide whether to accept the loss and exit the position or to meet the margin call. To meet the margin call the trader would need to send funds that would bring his account balance back up to the level of the “initial margin”. On the other hand, profits from trades can be used as margin for newly established positions.

If you would like to trade futures contracts or options on those contracts, you need to open a futures trading account. This account can be opened with a Futures Commission Merchant or an introducing broker for that FCM. A “FCM” is a firm that is licensed by the U.S. Commodity Futures Trading Commission to solicit or accept orders for the purchase or sale of futures contracts.

Most FCM’s and Introducing Brokers offer three levels of service. At Extra Mile Trading LLC we offer those three levels of service.

1. Full Service. This is where you would receive assistance from a broker in identifying opportunities in the market and placing your orders.


2. Self Directed or Discount online trading. This is where you select your own trades and enter your own orders.


3. Managed Accounts. This is where a Commodity Trading Advisor has power of attorney over your account. He would identify opportunities in the market and enter and exit the trades for you.

If you would like more information on opening a futures trading account, on the futures markets or on Extra Mile Trading LLC, visit out website at www.extramiletrading.com. Or call Les Jones at 1 (866) 553-5225.

DISCLAIMER: FUTURES AND COMMODITIES TRADING INVOLVES SIGNIFICANT RISK AND IS NOT SUITABLE FOR EVERY INVESTOR. THIS NEWSLETTER IS STRICTLY THE OPINION OF ITS AUTHOR AND IS INTENDED FOR INFORMATIONAL PURPOSES AND IS NOT TO BE CONSTRUED AS AN OFFER TO SELL OR A SOLICITATION TO BUY OR TRADE IN ANY COMMODITY OR SECURITY MENTIONED HEREIN. INFORMATION IS OBTAINED FROM SOURCES BELIEVED RELIABLE, BUT IS IN NO WAY GUARANTEED. THE AUTHOR MAY HAVE POSITIONS IN THE MARKET MENTIONED INCLUDING AT TIMES POSITIONS CONTRARY TO THE ADVICE QUOTED HEREIN. OPINIONS, MARKET DATA AND RECOMMENDATIONS ARE SUBJECT TO CHANGE AT ANY TIME. PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS.

eXtra Mile Trading, LLC wants you to know that there are substantial risks involved in trading futures. You should, therefore, carefully consider whether trading is suitable for you in light of your circumstances and financial resources. Traders should not rely solely on any one particular tool for investing/trading. Many unforeseen circumstances can occur which affect investing/trading and their outcomes. Investing, trading, and especially day trading carry with them substantial and significant risks. Investors/traders should be prepared to sustain a partial or COMPLETE loss of their trading capital. In some cases, losses can exceed initial investment. eXtra Mile Trading, LLC does not guarantee any trading results. Past results do not imply future performance.

About the Author

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