Why I'm Selling Gold

Gold many times trades in its own universe, and I sometimes am suspicious of how useful charts are. That said, I am going to respect the fact the gold ETF (GLD) just broke its 50 day moving (exponential) average and cut back our stake to a large extent. (please note the simple moving average is $90.40 so still in decent shape there)

I sold 1/4 of our Powershares DB Double Long Gold (DGP) June 2nd to lock in some gains as the chart went parabolic over $22. I am going to cut 80% of the remaining position here around $19.70 and look to buy lower.

DGP June 2nd on previous sale

DGP today

Let's revisit when GLD gets down to the 200 day moving average, $88ish if and when.

We've been saying for a week or so now that the "dollar weak, bond weak" trade was getting very overcrowded - even if I believe those trends are correct in the long term. They were due for a technical correction. And this whole market right now is "dollar weak, commodities up" based. So we are hostages to a very simple relationship... which is reversing for the short term at least. We'll see how long- lived it is; if it is very short-lived one should be buying commodities hand over fist right now. But it would not surprise me to see the dollar rally for a bit more here as the chart below shows some easy upside before it hits resistance.

Long Powershares DB Gold Double Long in fund; no personal position

Comments

[John Galt:]

If we get inflation, gold wins, if we get deflation or small inflation ( that isn't as bad as the big inflation traders believe), then selling gold wins.

I'm actually in the camp that believes gold is overvalued but bearish on the market so that makes me a little unique.

Good luck with your trade. $

Jun 16 12:42 AM

[Donald Ingram:]

Playing the gold market with ETFs is still just playing with paper. Don't get caught short with a bunch of worthless paper. Hold the physical.
Gold has very few industrial uses. All the gold ever mined (99%) is still with us. Now silver is a different story. Heavy industrial usage. Of all the silver ever mined, 90% is gone! At the bottom of toxic waste dumps, in your photo album or look no further than your flat screen TV. Silver is 100 times more scarce than gold is right now. Also a very good deal as to price. Hold the physical.

Jun 16 01:08 AM

[Dave Wrixon:]

Gold will certainly appreciate against the US Dollar?

But then what won't? The Zimbabwe Dollar perhaps.

The problem with gold is their is no economic activity when you hold it in bullion form, any other form and you end up grossly overpaying. Gold as a commodity really is that valuable, it main distinctive attribute being its color. Its main strength is its rarity, for which untold environmental damage is done to mine it. Frankly, if I were President of the US I would tax the bloody stuff.


On Jun 15 07:39 PM cheap oil now wrote:

> With the fed printing money in overdrive gold should see 1100 atleast
> this year. A great investment for the next decade.
>
> good reading: kl.am/tsc finance and econ articles

Jun 16 01:11 AM

[Gold Barron:]

I believe in the short term that the price of Gold will pull back to around the 850/oz level. The BRIC countries are trying their best to prop up the value of the dollar because they are so heavily invested in the dollar. They will gradually move their assets away from the dollar in a way that wont spook the currency markets. This will take time. Eventually the price of gold and silver will move much higher. I wish I knew exactly when.

Physical gold and silver are pretty much the only hard asset investments I feel comfortable buying right now. I dont even really care what the price of gold or silver is, I just want to insure and preserve my wealth.

Gold will not solve your problems, but it will pay for alot of grief.

Jun 16 03:05 AM

[Dave Wrixon:]

The best way to preserve your wealth is to move it away from the epicentre of the problem. That means getting out the Dollar, which Gold effectively does but it does not provide income. To establish reliable earnings over the medium term means it is important to diverse internationally. America is the epicentre of the problem, and its wobbliness is causing ripples elsewhere, but in the final analysis the BRIC countries and other commodity centres are on the march and the US is heading down the tubes.


On Jun 16 03:05 AM Gold Barron wrote:

> I believe in the short term that the price of Gold will pull back
> to around the 850/oz level. The BRIC countries are trying their best
> to prop up the value of the dollar because they are so heavily invested
> in the dollar. They will gradually move their assets away from the
> dollar in a way that wont spook the currency markets. This will take
> time. Eventually the price of gold and silver will move much higher.
> I wish I knew exactly when.
>
> Physical gold and silver are pretty much the only hard asset investments
> I feel comfortable buying right now. I dont even really care what
> the price of gold or silver is, I just want to insure and preserve
> my wealth.
>
> Gold will not solve your problems, but it will pay for alot of grief.
>

Jun 16 04:51 AM

[Rene Cohrt:]

I am no economic expert, but surrounded by thiefs and crimiminals and living in a democracy only by name, I prefer gold and silver to any time.

Jun 16 08:46 AM

[DONE_SONZ:]

The fundamentals have not changed for gold.Fiat currencies problems and debt problems continue to add fuel to the fire.

Jun 16 09:16 AM

[henryl:]

It's funny - you write something profound about finance or foreign relations and nobody has a comment. Give your thoughts about GOLD, and everybody has a better idea.

Jun 16 09:23 AM

[Mark Anthony:]

HenryL:

You hit the nail at the head! I feel the same thing. If I write an article titled: "Why I am selling all of my physical gold" you bet there will be no less than 100 comments, regardless of the content. Has gold buying become religious among gold bugs?

Gold is money. What good is money if you do not spend it?

On Jun 16 09:23 AM henryl wrote:

> It's funny - you write something profound about finance or foreign
> relations and nobody has a comment. Give your thoughts about GOLD,
> and everybody has a better idea.

Jun 16 10:45 AM

[Hot Richard:]

I just cannot bring myself to trade gold like this. I own a fair amount of a 2x Gold ETF and there is no macro trend that tells me to sell.

But, thanks for sharing your analysis as it helps me to think maybe there will be yet-another gold buying opportunity soon. That makes me happier today.

Jun 16 10:45 AM

[TraderMark:]

Just a short term call, basically commodities hostage to dollar right now. Gold has bounced back to recapture 50 day so it could still be ok. Don't like to see financial instruments gapping down like it did a few days ago. How (if) it fills that gap to $93 will tell me a lot.

No problem buying something back if it reverses on you back to the upside.

Long term still positive .


On Jun 15 07:48 PM Albert Ling wrote:

> I think if you base your investment decisions solely on charts, you
> are bound to lose money on the long run. That said, I think gold
> is fairly priced.. if Bernanke anounces some more money printing,
> then buy as much as you can.

Jun 16 11:51 AM

[TraderMark:]

I do find it ironic. Gold is almost like a religion :)


On Jun 16 09:23 AM henryl wrote:

> It's funny - you write something profound about finance or foreign
> relations and nobody has a comment. Give your thoughts about GOLD,
> and everybody has a better idea.

Jun 16 11:52 AM

[Bill40:]

Dave Wrixon comments that the government should tax gold because of the environmental impact of mining.

I think the government should just become fiscally responsible again. That would allow everyone who is in gold, because there are ~$550,000 in government liabilities per household and no way that can be paid off except with a large amount of money printing, to go back to holding dollars.

However, with our current "take your money if you're productive and bribe voters with it" government, it forces us into gold. Consider the environmental damage a side-effect of corrupt government.


I think they should tax the production of gold.
The government should maybe tax or regulate the production of gold. T

Jun 16 12:42 PM

[optionsgirl:]

I'm a firm believer in taking profits, especially when you aren't sure of short term future direction. A bird in hand!

Jun 16 02:00 PM

[Plebian:]

Silver is honest money. Is this why central bankers hoard gold, while silver (the people's money), has been turned into a lowly 'industrial metal'? It is time for people to reclaim their wealth in the form of real silver!...

"No enduring fabric of national prosperity can be built on gold. Gold is the money of monarchs; kings covet it, the exchanges of nations are effected by it. Its tendency is to accumulate in vast masses in the commercial centers, and to move from kingdom to kingdom in such volumes as to unsettle values and disturb the finances of the world. It is the instrument of gamblers and speculators, and the idol of the miser and the thief. Being the object of so much adoration, it becomes haughty and sensitive—and shrinks at the approach of danger, and whenever it is most needed, it always disappears. At the slightest alarm it becomes to look for a refuge. It flies from the nation at war to the nation at peace. No people in a great emergency ever found a faithful ally in gold. It is the most cowardly and treacherous of all metals. It makes no treaty that it does not break, it had no friend whom it does not sooner or later betray. Armies and navies are not maintained by gold. In times of panic and calamity, shipwreck and disaster, it becomes the chief agent and minister of ruin. No nation ever fought a great war by the aid of gold. … Gold paid no solider nor sailor. It refused the national obligation. It was worth most when our fortunes were lowest. Every defeat gave it increased value. … But silver is the money of the people."
--John J. Ingalls, Senator from Kansas (in 1877)

Jun 16 02:16 PM

[MadScientist:]

For a short term play (like two days to two weeks) you could pick up a few percentage points selling UGL and buying GLL. My guess is that gold will move to about 900 USD before rebounding (strong prior S/R lines at 920 and 890). Just be ready to switch back to the long position once gold swings back up (or when $USD hits 82, a strong resistance line and the current 50 day MA). That's the time to swing back.

Play UUP and GLL until one of these hits their resistance lines, then switch it up. The paper ETFS are trading vehicles - so don't be afraid to trade them right now. That's what they are designed for (especially the 2x ultras)

Jun 16 02:19 PM

[Market Sniper:]

Mark, gold is NOT a religion. It is money.


On Jun 16 11:52 AM TraderMark wrote:

> I do find it ironic. Gold is almost like a religion :)

Jun 16 05:07 PM

[HardwoodFlo...:]

Is it me or does it seem like everytime gold get's close to $1000 somebody steps on it? Somebody BIG out there keeps it in check every time it nears $980.

Jun 16 05:36 PM

[TraderMark:]

Any major difference between UGL and DGP? For gosh sakes, so many "me too" ETFs out there.


On Jun 16 02:19 PM MadScientist wrote:

> For a short term play (like two days to two weeks) you could pick
> up a few percentage points selling UGL and buying GLL. My guess
> is that gold will move to about 900 USD before rebounding (strong
> prior S/R lines at 920 and 890). Just be ready to switch back to
> the long position once gold swings back up (or when $USD hits 82,
> a strong resistance line and the current 50 day MA). That's the
> time to swing back.
>
> Play UUP and GLL until one of these hits their resistance lines,
> then switch it up. The paper ETFS are trading vehicles - so don't
> be afraid to trade them right now. That's what they are designed
> for (especially the 2x ultras)

Jun 16 06:05 PM

[Market Sniper:]

HW, you are absolutely correct. A short corner has been established in both silver and gold. Two banks in each and guess what? They are the banks that are the custodians for the metal's ETF's. Check out Ted Butler's work on the subject.


On Jun 16 05:36 PM HardwoodFlooring wrote:

> Is it me or does it seem like everytime gold get's close to $1000
> somebody steps on it? Somebody BIG out there keeps it in check every
> time it nears $980.

Jun 16 06:07 PM