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A Lesson in Gold Trading by Sideshow Bob
Veteran gold traders can attest that piling onto breakouts, especially in highly leveraged futures, can quickly become a losing proposition on a reversal.
While yesterday’s surge in gold was confirmed with gold priced in other currencies (especially impressive with the confirming moves in the commodity currencies of the CAD and AUD):
…there is a slight seasonal negative at work here until the end of October:
Traders should recall that the second week of October 2008 began a painful slide after a strong September. The forced deleveraging from all instruments on margin call mania exacerbated the move last year, to be sure. But it seems prudent to wait for a move back to the 1025 to 1031 area (basis Dec 09 contract), which is the 61.8% to 50% retracement box from the breakout of last week’s highs at the 1011 area. Gold could even retrace to the 1010 (61.8% off 985.50 low) with the medium term bullish trend in tact.
In our opinion, better to be careful and miss a move than to step on a rake.
-EB
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There might be a better time to buy, but that doesn't mean gold isn't up spectacularly from where it is now, in 2019.
We have no idea if it will be $2500, or $10,000.
They don't sell you gold, no matter how many Zimbabwe dollars you offer, just remember that.
Turning off the printing press might be bad for gold, but what is the likelihood of that happening? Plus, it would be worse for the stock market.
"When an idiot like Glenn Beck is pumping gold, you know its time to sell."
Thx Anon. 92813 Been bullish since the mid-200s, but you've called me out.
Everybody makes this big deal about gold going from 300 an ounce a decade ago to 1050 now. That's 300%, and impressive.
However, what about BAC going from 3 dollars to 17 dollars in six months? That's surely more impressive than gold's run.
Where's all the people saying "buy BAC"?
They're not, because it's at its top, or close to it.
When an idiot like Glenn Beck is pumping gold, you know its time to sell.
Or shorting DRYS from October 2007 to today.
Talking about returns in the context of time at the exclusion of other possible more profitable investments is like playing poker where you get to take away cards from the other players.
better off buying the AUD/JPY cross right now , use the fx leverage and enjoy the carry and wait for dollar mean reversion/jpy centralbank POMO actions to weaken yen
I thought Japanese were pulling a suicidal strong yen move; are you saying they'll cut the legs off it again?
I'm with EB on this one (sorry GG). Have been selling and will continue to sell paper metal and PM stocks into this run (I treat these things as playthings while continually adding long physical on dips). The few positions I am keeping, I'm hedging with options. Popping in and out of paper gold has been quite profitable this year.
September was an interesting month for PMs but didn't turn out to be the flashpoint I was hoping for. Next potential flash point is December delivery. Intend to be very very long in the runup to that.
Gold is not a trade. Why anyone would ever sell gold given Bernanke and Obama is beyond me. You can have my gold when you pry it from my cold, dead fingers.
WTF is up with the captcha question (-16) times 39? I'm deep into a bottle of wine.
I have never seen such extreme positive sentiment as I'm seeing for GOLD. Every Tom, Dick & Harry (not to mention G-Gordon) is hyping gold. I talked to the guy that installed the floors in my CO home today (I'm in NYC) and he told me to buy gold becaue it'll be $2,000/oz by X-Mas. I talked to my house painter in CO and he asked if he should put all his money in gold.
GLD is the fifth largest holder of physical gold in the world. Gold speculation is rampant due to GLD and other ETFs. Who is going to buy the physical from GLD when the trade reverses? What will happen to the physical price as a result?
And as to the usd, just wait for the deflationary depression to take hold. How's everyone going to feel when BAC, C, WFC, etc. collapse into the arms of the socialists in Washington?
Desperate attempts by shorties and powers wishing to manipulate gold to their advantage will try to break you off your positions. If you are trading gold, don't! Play the stock market, ETFs, or bonds. They are the playthings of silly chasers of pretend value in a printing press world where labour and production and natural resource mean nothing.
Gold is for Long, Long term in this secular bear. It is not worth trading except maybe the goofy ETFs because of storage, shipping, insuring costs.
Stop the nonsensical speculation and become an investor using your own money. Tired of junk and junky people without assets and without skills.
All hat no cattle represents many who comment against gold.
Or gunslingers for hire parroting their master's book.
Gold is so volatile it's really hard to trade. I try to add just a little and keep holding through the drawdowns, which are always pretty scary for me.
http://www.zealllc.com/2007/goldseas2.htm
"...after a brief seasonal pullback in early October..."
http://seasonalcharts.com/classics_gold.html
End of September is one of the historical seasonal high points, but this year has been "different" in many ways. For instance, "sell in May and go away" has certainly not worked this year.
I am Umaguma.
GG / PM,
Look here: http://data.tradingcharts.com/futures/quotes/GC.html
I am especially interested in the delivery period for the Dec09 contract. This could be very interesting. Imagine what happens if gold stays this high until then, and high percentages of longs stand for delivery as they have been in recent months.
KITCO is obviously at the leading edge and has removed "US" from the gold pricing....;>)
"The Kitco Gold Index has one purpose, that is to determine whether the value of gold is actual, a reflection of changes in the US Dollar value, or a combination of both.
The U.S. Dollar Index® represents the value of the US Dollar in terms of a basket of six major foreign currencies: Euro (57.6%), Japanese Yen (13.6%), UK Pound (11.9%), Canadian Dollar (9.1%), Swedish Krona (4.2%) and Swiss Franc (3.6%). It is an exchange traded (FINEX) index and has become a standard used worldwide.
The Kitco Gold Index is the price of gold measured not in terms of US Dollars, but rather in terms of the same weighted basket of currencies that determine the US Dollar Index®."
http://www.kitco.com/kitco-gold-index.html#RT
Will the CB's start dumping if the price of gold goes higher
Jim Rogers said he might not buy gold now but doesn't know and will buy gold when he feels like it. He also said that if gold was adjusted for inflation it should be 2000. Wrong. Adjusted for inflation it should be 400. Gold is in a bubble now. Watch out
Adjusted for inflation is 400??? Go check out the FED's own inflation calculator: http://www.minneapolisfed.org/index.cfm
then type in: 1980 for year you bought something
Then type in: 800 for the gold price high in 1980
Then type in: 2009 for the year you want to see the inflation adjusted value.
According to the FED the inflation adjusted price of the high for gold is about 2000. Now, not only is your 400 price waaaay off, but I would like to hear a comment about how something that is half the price of its all time inflation high is in a bubble? Was housing at %50 its all time high? How about tech stocks? Gold is a bubble...I think not, not until your cabby is buying and selling gold options on his cell phone while driving you to the bank to transfer more cash to cover your margin gold short.
You're not making any sense. 400???
Love the arguments not to buy gold after such a long consolidation. Classic Wall of Worry.
Gordon is not the only one who has been long gold since before they added it to the periodic table!
Even Jim Rogers, who likes gold, said today that he wouldn't buy it now. He feel that the price will go "way up" over the next 10 years. Traders don't have a 10-year time horizon. Caution is warranted.
Why would gold have a seasonality? Usage should be constant, as it isn't really a industrial input, no?
I understand that Christmas gift giving, the Indian festival season of Diwali and the November-December Indian wedding season (India is a huge consumer of gold, and gold the traditional Indian wedding gift) are commonly cited as explanations for seasonality.
Lessee. Since 2000 , gold went from what? 350/oz to 1040/oz?
Long it's the best bet going period.
Even with interest and all that jazz, paper has not returned as good as gold because they keep printing more of it.
BAH HUMBUG!
Give me all the gold in the world and I shall be happy!
I shall rule the planet! I am
SIR EVELYN ROTHSCHILDE!
I also own a mansion and a yacht.
Since 2000? How about since 1994 the S&P500 has provided no real return, and no real return if you go back to a two generation term like 40 years. Run SPX in gold on Bberg since 1968. Only from starting points of the great bull market in 1980 with equities yielding 5%, gold up 25x in 9 years off the fixed price in 1971, tax rates at 70%, and the Fed cutting rates 1900 basis points over the next 30 years, did you have any real return in stocks measured in gold.
Are stocks valued like 1980? When investors realize stocks have gone nowhere in 40 years in gold terms, they will buy gold and turn off the BS.
He lies in wait to be first to post on any gold article.
This is a speculative move based on fear/greed. Path of least resistance. No inflation. No dollar demise.
Gold bulls savage fiat currencies, yet fail to see that it's fiat derivatives and hot money that are pushing this higher.
+1
Gold will be hit hard if we get another "major margin call event" and the bugs don't seem to except that?
Debt is still price in USD and thats what will be called in.
True bugs not only expect it, but relish the opportunity to keep stacking on a retracement.
How about piling in before the breakout?
Edit: It amazes me how people keep on coming out with bearish reports/articles even as bullion has rocketed skywards all this while. BTW, this is EXACTLY the kind of sentiment we need for this move to continue.
instead of trading "gold" why don't they take delivery and see what happens? I am Eddie Haskell and I approve of this message.
Love ya Gordo, but "before" was in 1999 when nobody wanted gold...now that every newspaper reading chump is all over it, caution's not a bad idea. I think it'll run too, but lining up to buy at these prices like some newbies are doing, not so smart...now if you're holding from the 300's well, just sit back and enjoy.
GG the breakout sez strong like bull, thats when you buy.
note to anyone new to zerohedge, gordon has been long gold since before they added it to the periodic table. but don't worry he'll remind you in case you forget.
Blue Horseshoe LOVES bullion. I am Tiger Woods.
pivot, anybody ever told you that you can be a real arse at times. Don't mess with Ghekko. Gordo is the man with the plan. I am Eddie Haskell.
That's awesome.
I am Chumbawamba.
This is not a bearish report, but a warning against buying at highs. The 985 support level was the 61.8% retracement of the previous breakout range of 960 to 1025. You could have bought 985 to 992 and indeed have piled on before the current breakout. As we are dealing with the present only, there is a good chance of retracement based on this pattern and seasonality. Goal is to provide possible entry levels with good risk/reward characteristics that will position traders for the next breakout.
But see, there's this tiny little problem with huge breakouts (normally it's not and waiting for a correction is very wise strategy) like this - you may not get any retracement until the bull has run quite afar leaving everyone who has been "waiting for a better price" in the dust. I think Mr. Gary says it really well:
http://garyscommonsense.blogspot.com/2009/10/waiting-for-pullback.html
Buy now or be priced out forever and ever.
Everything I ever needed to know I learned from Yukon Cornelius and Burl Ives.
http://www.youtube.com/watch?v=oMlqn_Hjyi8
http://www.youtube.com/watch?v=BePFbDTqmfg
It doesn't matter what price you buy it at, and this sentiment will prevail for the next few months certainly, and probably for the next few years.
It doesn't matter if you buy it at a peak, as long as you have the legs to wait out the retracement to the next peak. Buying on the dips is a good strategy to get the most bang for your buck. Anyone wanting to catch this train should wait until the next stop, but don't be late, this could be the last opportunity to get it "cheap".
I am Chumbawamba.
question for Chumbawamba.
How long will the pm "bull" run continue? What does one buy when the bull is over? I submit the "bull" will never end. How can it? They say a fiat money system last at the most, a hundred years. This fiat system started in 1913. In 2013, it will be a hundred years old. We are at end of a era and are now witnessing with our own eyes, the death of a finacial system and the death of a nation corrupted by that fiat system.
I am NOT Chumbawumba.
They will replace it with a new fiat system, with lots of posturing about safeguards and fiscal responsibility and learning from mistakes and new regulations, and all of that will be bullshit.
When the gold bull is over, one puts one's gold back to work by buying income producing property. The death of this system will not be replaced by mad max, as some believe. It will be replaced by a new system. Think of this as a currency reset, and gold as your way to move wealth forward in time without it being stolen by hyperinflation.
Totally agree with you. But this system can last for quite a while still. With Money & Credit increasing exponentially, by requirement of the system's architecture, finite resources like Oil & Gold will mirror the Money curve and maintain their value, more or less. So in this scenario, trading is the best way to increase one's net worth, as income instruments simply don't have the require yield. And I'd rather trade smtg that maintain it's value!
But trading is very risky, and relying on only that to retire early isn't that much of a good idea (for most ppl). After real estate prices hit bottom in a few years, getting mortgage and buying an income generating property is a great way to let inflation eat away at the value of the debt.
Gold, like other stuff, will and does go up and down while in a bull.
"Gold could even retrace to the 1010 (61.8% off 985.50 low) with the medium term bullish trend in tact."
Its not bearish to point out there may be consolidation following a big move.