The yellow metal has recently had less friends than a child with Chickenpox! $1300 was touted as support, but short work was made of that, given the current price of $1290*.
This seems in contrast to the global backdrop where Gold’s safe haven status should be particularly appealing.
Recent Events and the Dollar Index
Looking at recent events, the US Dollar Index experienced its biggest one day decline, yet we saw only the smallest move in Gold. Ordinarily, you would expect to see a solid and decisive move in the commodity price, on the back of such weakness.
Equally, if we look at the geopolitical spectrum, events in Russia/The Ukraine should also be providing support – market tension or nervousness typically equals a move up in the price of Gold – but not just now. Instead, we are seeing some of the risk premium unwind out of Gold, on Eastern Europe’s bubbling along.
Fed Chair, Janet Yellen’s commentary last night did little to provide support, with Gold heading further south. Bottom line is there is NOTHING going on in the US economy right now, which will be a catalyst for rising interest rates over the coming months. Unemployment remains stubbornly high, inflation muted and the housing market fragile.
As such, the dollar index is likely to soften further. Aha – the economists amongst you may be thinking – that should push Gold up. Don’t hold your breath.
Investors are seeking yield
We have talked for sometime that investors are seeking yield and aren’t bullish the US dollar – two very compelling reasons to avoid long term, long positions in the yellow metal. How about a covered call instead? For example on Chesapeake Energy Corp (CHK), which we closed last night for a gross return of 9.5%*, over a couple of months.
I will be spending some time in the States a few times, a little later in the year, and as always getting a first hand feel of things, can be very revealing. In particular the grass roots observations can form the basis for some great trading – a couple of years ago, during time in Arkansas, we produced some great trades in the Agricultural complex, based on research and observation of the drought.
Now, for those looking beyond the stock market, the US Dollar Index is providing plenty of opportunity and our Futures team are on top of this. Speaking of opportunity, we have had a number of emails recently in regard to Steve Conrad’s Futures Team and their performance. Over the past few weeks, we have shared with you their performance this year – which is certainly impressive. A lot of people have emailed or called through and several have requested the opportunity to meet Steve and discuss what his guys are doing.
He rarely ventures beyond our trading floor and his Macadamia Farm. However, he has agreed to running live training and strategy sessions – one in Qld, the other in Sydney – later this month.
Sydney Thursday 29th of May
Evening Session: 6pm – 8pm
If you would like to reserve a seat (Space will be limited) then register your interest here.
* Past Performance Caution.
The past performance of this product is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect its future performance.