October Gold is up $12.00 per ounce at $1017.30 this morning as I write. The enclosed chart shows that gold is attempting to break out to the upside. Please see the following email that includes the weekly longer term chart on gold to see the magnitude of this break out! Gold is rising because of the steady decline in the dollar, and rising inflation expectations. After all, the Fed Chairman yesterday declared that the recession is over.

Followers of this letter should be long one October Gold futures contract from $964.00, short one October Gold ($960 strike) call option from $18.50 and long one October Gold ($930.00 strike) put option from $17.00. You should also be long one October Gold ($1045 strike) call option and short 2 October Gold ($1060 strike) call options from a credit of 50 cents. These October options expire in 8 days. For those of you in the ($1045/$1060) ration call spread, we need to stay vigilant to look to take the trade off if prices approach the $1060 area.

Followers of this letter should also be long one December Gold ($1100 strike) call option and short 2 December Gold ($1180 strike) call options from a credit of 50 cents, and long one February Gold ($1270 strike) call option and short 2 February Gold ($1400 strike) call options from a credit of $1.00.

We will continue to hold these positions for now, and be looking to exit the October gold spreads over the next 8 days.

Sep. 16, 2009
David Hall