Gold Takes a Breather -- Buy Into It

Whoa... And I mean Whoa. Last night I was a bit miffed that I missed the pop up in gold at the open. Gold opened in Asia only to pop up from $664.00 to $677 in just minutes. It's current price? $647.00.

That's a $30.00 high/low range. I didn't sleep a lot this morning... working phones, emails, and IM's chatting with a few friends around the world. Some of the desk jockeys I know out in London have nothing more to say about the move other than it's just taking a breather based on the potential outcome of the Mid East situation.

Israel is "offering" terms to end the situation. This is a good, and reasonable, move on their part. They are asking for Hezbollah to move away from the boarder, and the return of the two soldiers. Then, they are asking for the international community to militarily disarm the group. Nice move to bring them in. They make themselves out to be the good guys.

Will Hezbollah agree?

When pigs fly.

The cause that this group fights for has no international borders, nor do they follow the same logic others would. They don't have to answer to their citizens when missiles start landing in their largest city of the country. Further, they aren't even necessarily Lebanese, which makes this a very sticky situation for the government.

That would mean gold is still on. Not only is it on, but it's offering a nice discount compared to what I was hoping to get in on last night. For, I'm not in any rush. Perhaps there's more to the move down from here. I can't see too much.

My strategies for trading are generally always the same. I'm looking to sell options out of the money and let them expire worthless. Last night, I was thinking of selling the $650.00 level. Now, I'm looking at the $600's and will probably buy the $700.00's. I'm still going to wait a few hours/days.

If you are long, and perhaps a smidge underwater, I'd think that it will only be a matter of time before gold heads higher. There are others out there that are likely to be looking at the price and saying the exact same thing. Gold is a decent buy at this level considering the malaise that is brewing out in the Middle East.

The end of this situation isn't necessarily here. There are developments. But, there hasn't been an end.

Comments

[saud ibn ab...:]

Metallic gold today fails to be a hedge or even a safe haven.

With extemely distructive power in reach of "low population nations",
whom will be about to trade anything in Middle East. Not dooms day reality of high destructive weapons used in fits of revenge, no rational limited uses. Thus, historically known heavy holders of metallic gold may not be alive to do that trade in distress. Further more, direct and indirect costs buy mines, extract ore, process, pay royalities, refine, ship, store, guard, taxes, labor costs, health care, legal fees etc. Means anyone whom buys is paying for othr than intrinsic value of gold before any speculative bubbles surface. Get out of metallic gold now and never invest in again.

2006 Jul 17 04:58 PM

[Max Petrisek:]

Just mentioning involvement in options to a broad audience as you have done is irresponsible. There is so much to know and great risk which you never mentioned.

2006 Jul 17 07:22 PM

[David Taylor:]

Max...

I posted something up on my blog about your concerns regarding me mentioning options positions. Not sure that it will make it onto the Seeking Alpha website. You can find it at dismally.com

Thanks for the comment.

2006 Jul 20 12:31 PM

[David Taylor:]

Saud. I'm just curious about your comment that gold fails to be a hedge or safe haven. It went up in response to the Israel situation. Sounds to me that it in fact is exactly that. Especially since there has not been an escallation, which is specifically what the markets feared.

2006 Jul 20 12:28 PM

[saud ibn ab...:]

Note metallic gold or even gold mine stocks are not linked to real economic events. With estimated 2 billion dollars(usd) infra structure destruction in Lebanon.

2006 Jul 20 05:30 PM

[BRUCE SMITH:]

Dear saud ibn abdulaziz,


I may be a little late on this but....

Have you considered the fact that we are poised on the brink of massive inflation worldwide in most of the major currencies?

With TRILLIONS of $USD's and other currencies being printed like water trying to keep the financial game afloat...how long do you think this can go on before people start flocking to gold (and silver) as the true store of wealth and risk protection?

You also have to consider the "fundamentals" behind gold and silver (which are even better)....everything I read and listen to states that there is a masssive shortage of both these metals mined and above ground....

I am sorry sir, but I just don't see the logic in your position...war, hurricanes, or any other events cannot alter the facts outlined above....

On a personal note, I would hope that some "real and meaningful resolution" to the conflicts in the mideast can be found before the whole region is decimated by power-hungry fools....but I know this is only wishful thinking.

Best Regards

2006 Jul 23 12:44 PM

[saud ibn ab...:]

Estimated 57 trillion usd at issue. Metallic gold, gold warehouse reciepts, gold stock, under Johnson "absorption theory"(see Nobel Prize awarded) not correct investment vehical for hedging, rapd monetary/finacial products driven inflation. solution email me.

2006 Aug 05 04:46 PM

[saud ibn ab...:]

Are you moderators posting any of three instanst reply or comments by me. Has a police state mentality infested our generation as did Nazi German or evil empire Soviets? Moderator(s) email a reply.
Truth about Hitler's uses of metallic gold stolen from central banks and Kingdom of Saudi Arabia's nevertheless refusal to sell Hitler oil for metallic gold, is a truth need today.

2006 Jul 25 06:33 PM