January 31, 2011 - So Close, Yet So Far on Gold

Featured Trades: (GOLD), (GLD), (DGZ), (GLL)

2) So Close, Yet So Far on Gold. Close, but no cigar on getting out of my gold puts on Friday. We opened low enough on Friday morning to get within striking distance of my downside target for the barbarous relic at $1,280. But once the rout in equities started in earnest, it was off to the races for gold, and it was all over for gold put holders but the crying. Gold managed to pull a $36 rally out of the hat on aggressive short covering before giving up $10 at the close.

We knew all along that gold was never going to make it to $1,280 in one straight shot. If you want to see why long term bulls are so determined that this level will hold, take a look at the chart below, which shows the convergence of several trend lines around my target. I think we'll take another shot at the downside, in days, if not weeks, and double bottom at the very least. Keep in mind, also, that owners of the gold put spread have time decay working in their favor now, as we are so solidly in the money.

Gold Sure Was Getting Cheap

Legal Disclaimer

There is a very high degree of risk involved in trading. Past results are not indicative of future returns. MadHedgeFundTrader.com and all individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein. Affiliates of MadHedgeFundTrader.com may have a position or effect transactions in the securities described herein (or options thereon) and/or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies.