How does one gage (no pun intended) the future movement in the price of gold? My best answer would be: by researching all aspects of the gold market each and every day; speaking to many different people, from traders around the globe, to folks at the Mints, refiners and dealers; listening to what the FED policy makers have to say and watching worldwide currency activity.
I’m always being asked, “What do you think the price of gold will do in the short term and for the year?” As in any market, trying to calculate the move in the next five minutes is always a challenge, if not impossible. And at times there will be conflicting information making it very difficult to put together a strategy.
Nonetheless, I find the most important factor in finding future movement in the price of gold is market trends, or in other words factors that create momentum.
Whether technical or fundamental (my favorite), there are different signs that indicate a possible direction. Two things stick out today. As I indicated in my previous comments, for almost two weeks now gold ETF holdings have continued their trend in increasing holdings each day. Another factor I found was option related: August $1,175 gold calls traded $26 dollars last week. Both are bullish indictors and as we all know there are NO guarantees.
No crystal balls, no magic wands. So we use the tools I indicated to TRY to determine a direction. Using these tools can provide invaluable insight that can add value to any conversation with any client.
At the time of this report, we witness a weaker dollar, lower crude prices and equities in negative territory. Gold is catching a bid here and at some point I believe that if this rally continues, some of the Wall Street traders will have to cover their short positions.
As we all know life is a gamble and trading precious metals is no different. But with a solid education and using the proper tools, your odds can improve (Sounds like a fathers speech before sending a kid out to college - My apologies).
Author Name: Walter Pehowich
Walter Pehowich is the executive vice president of precious metals investment services for Dillon Gage with over 38 years of experience in precious metals investment services. His career began in 1977 at Bache (which evolved to Prudential-Bache Securities and then Jefferies Investment Bank). While at Jefferies, he served as senior vice president with oversight of investment grade precious metal products. Pehowich holds a National Futures Association (NFA) Series 3 license, authorizing him to advise and sell alternative investments in commodities and futures markets.