Sold my gold bullion today:
Sell 20%* position gold at $1344.45, + 9.65%.
Short-term, gold is extremely overbought here. Two of my advisors have confirmed the feeling I've been getting from the "sell the dollar and buy anything" trade. Dave Rosenberg says that gold futures are at the third highest bullish total ever. Jesse's Cafe Americain has a beautiful chart showing gold popping through its trend channel in a parabolic move.
Jesse has a $1,375 target on gold before a pullback, but even he achnowledges that the recent move is very strong.
I am holding on to three other positions for the moment: long NG Jan '12 10 calls (0.5%*), long IAG (10%*), and long ORE.TO (1%*). IAG has not participated in the recent parabolic move, and the chart looks very boring.
I am looking to unload ORE.TO and the NG calls given the right opportunity. ORE.TO has doubled in the past couple of weeks, and the chart is clearly parabolic.
Since there is no news out and other small gold companies are also skyrocketing, it looks like the safe thing to do is sell the first day volume comes out below average. At midday today, we already have volume of 97k versus an average of 198k over the past three months. It doesn't look like I will sell today. The price is holding steady. The NG calls are almost in the money after NG jumped from $7.63 a month ago to $9.54 today. NG is now 29% above the 50-day moving average, and just like ORE.TO, no company news. Just a frothy overbought peak. Unfortunately, the calls have not kept up with the stock. When I bought the options, NG was at $5.98. The IV, which I use as a proxy for the time value of the option, was around 80, but is now down to 51. If the IV picks back up, I will sell these as well.
In the meantime, I will watch the risk on trade for signs of cracking. This is a trend that will have an ugly backlash against the shark-feeding-frenzy of the "sell the dollar and buy anything" speculators. Everyone participating in this trend is a short-term trader. Today, the dollar is down against the yen as everyone plays chicken with the Bank of Japan. As long as the dollar hovers near the $/82 line in the sand, everyone expects more money printing. But how long it lasts is anyone's guess.
* This number refers to the size of the position when bought, as a percentage of the value of my portfolio. This often changes due to price changes. ORE.TO is presently 4% of my portfolio, as it has quadrupled in price since I began holding it. Also, this number does not take into account leverage. If I have a $10 portfolio and use 1.5X leverage, I have $15 in positions. If I buy $3 in bonds, I would calculate this as $3/$10 or a 30% position.
Disclosure: long IAG, long NG calls, long ORE.TO