February Gold is down $5.50 per ounce at $1092.60 this morning as I write. The included chart shows that February gold is still correcting off of its price highs made three weeks ago in early December. The directional movement indicators are still bearish and the ADX line continues to fall. I believe that this is a large correction in gold that is part of a major long term secular bull market. The best thing to do right now is to be patient and wait for the charts to give us clues as to when it is time to put on more bullish positions again. Until then, gold prices could fall further in the near term. The lows in February Gold a week ago in the $1075 area may turn out to be important lows considering that those lows were very near the 90 day moving average, and near the area where gold broke out to the upside in early November following India’s purchase of 200 tonnes of gold from the IMF in October. I would think that if the $1075 area doesn’t hold, then a test back toward the $1045 area where India actually bought the gold would be the next potential low. Again, let’s be patient and wait for evidence of a low in this correction before getting aggressive again.
Followers of this newsletter should have the following positions:
Long 2 February Gold ($960 strike) put options at $10.40 each. (The cost basis is zero if you consider the profit made on the short $935 puts that were associated with this trade originally).
Long 2 February Gold ($970 strike) put options at $10.60 each. (the cost basis is zero if you consider the profit made on the short $950 puts that were associated with this trade originally).
Long 1 February gold ($1270 strike) call option at an average cost basis of $5.00 per ounce.
(February Gold options expire in 27 days).
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Long 1 April Gold ($1210 strike) call option at $33.00. (The cost basis is now $23.00 if you consider the covering of the one short April Gold $1300 call option on December 22nd).
Short 1 April Gold ($1300 strike) call option at $17.50 each.
Long 1 April Gold ($1275 strike) call option at $17.80 per ounce. (The cost basis is now $11.90 if you consider the covering of the one short April Gold $1400 call option on December 21st).
Short 1 April Gold ($1400 strike) call options at $9.90 per ounce each
Long 1 April Gold ($1375 strike) call option at $11.80. (The cost basis is now zero if you consider the covering of the two short April Gold $1500 call options on December 22nd).
(April Gold options expire in 85 days).
David Hall
The information and opinions contained herein comes from sources believed to be reliable, but are not guaranteed as to accuracy or completeness. The risk of loss in trading futures and/or options can be substantial. Each investor must consider whether this is a suitable investment. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Past performance is not necessarily indicative of future results.
This newsletter is not intended for dissemination to the public without prior approval from David Hall.
