Thursday, August 6, 2009

Gold Spot Eyeing $1,000, GLD at Inflection Point (2 Year Chart)

Traders have a big decision to make on the price of gold here... $GLD is forming a symmetrical triangle formation which means judgment day is approaching. Below is the 2 year chart and the Gold/US Dollar relationship. Since May, Gold and the US Dollar moved inversely (gold up, dollar down) once the safe have bid collapsed and fiat-flationary forces took hold. If deflationary pressures continue with low inflation expectations and decent real yields, Gold's time to shine above $1,000 might be on hold. However if this new bull market (according to Abbey Joseph Cohen) puts pressure on prices or expectations going forward, Gold would probably be a great hedge. Remember that monetary policy could also throw the currency markets a curve ball. Rates have nowhere to go but up. Watch to see if Gold gathers momentum and breaks through resistance. I'd wait for the set up to play this on the long side with put protection, or vice-versa (short). Or as BNY Convergex Group says, buy options on gold as volatility increases (chart below). No recommendation. Watch the chart.

GLD (Gold ETF) 2 Year Chart

Gold/US Dollar (Stockcharts.com)


Here are recent call/put premium ratios on the gold futures options to judge sentiment. Via Barchart.com: September expiration 0.64, October 0.48, December 0.80, Feb 0.42. Check out the gold implied volatility chart embedded from curvingfutures.com.






Recent posts:
GLD Dec Out Of The Money Put Spread (75-85), Million Shares In Minute (Aug 6)
GLD Symmetrical Triangle, GDX, $USD, Australian Dollar/Gold ($XAD/GOLD) (July 20)

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