Posts Tagged ‘Gold’

Gold Soars to Record High

June 20, 2010

For the second consecutive session, gold futures skyrocketed to a record, closing at a price of $1,258.30 an ounce after touching an all-time intraday high of $1263.70. For the week, gold advanced 2.3%, marking the commodity’s fourth straight week-over-week advance. Great timing for the issuance of Canada’s new one million dollar gold coin, the world’s biggest, purest and highest denomination coin (pictured above).”Gold is looking for any and every opportunity to go higher, and we all know the reasons why — the safe-haven factor, sovereign debt risks and so on,” said Peter Hillyard, head of metals sales at ANZ Investment Bank. Analysts are predicting gold prices between $2500 and $3000 over the next 18 months. “People are tired of their zero percent T-bills, afraid of the stock market, and afraid of the double-dip recession,” said James Cordier, a portfolio manager at OptionSellers.com. Reuters reports weaker U.S. economic data and a rise in unemployment benefits last week also drove anxious investors to return to gold as a safety play.

Equites have proven their resilience, however, as the Dow Jones Industrial Average pushing back above 10,400 to close Friday with its second consecutive weekly gain. Additionally, the S&P 500 closed above 1,100 for the first time since mid-May. The tech-rich NASDAQ index fared the best of the three, adding 3% for the week. All this, despite a downgrade of Greece’s debt to junk status, the steepest monthly drop in home construction in decades, another disappointing jobs report, sluggish manufacturing data, and another week excuses from BP plc (BP). The government reported single-family home construction fell 17% in May while applications for building permits dropped 5.9%. AP reported that the number of people filing new claims for jobless benefits jumped last week after three straight declines, another sign that the pace of layoffs has not slowed. Initial claims for jobless benefits rose by 12,000 to a seasonally adjusted 472,000. Meanwhile, consumer prices fell for the second straight month. Meanwhile, BP suspended its dividend and Government-sponsored mortgage purchasers Fannie Mae and Freddie Mac plan to delist their shares from the New York Stock Exchange.

Analyst Todd Salamone wrote “With the SPX coming into the week at 1,117.51 and above its 200-day trendline, the 1,120-1,125 area could be the next challenge from a technical perspective. For example, the 160-day moving average is sitting at 1,126.10 – note on the chart below that this moving average marked the February 2010 low. Therefore, the risk to the bulls is that this trendline becomes resistance on the rally. Moreover, the 1,120 area marked resistance in November and December 2009 during a narrow trading range.”

The CBOE Volatility Index (VIX) declined during the past week, from 28.79 to 23.95 by Friday’s close. With SPX 20-day historical volatility at 26.96, this would suggest volatility is still headed lower, a bullish sign for stocks. The risk is that if volatility is trending higher from a longer-term perspective, the current “pullback” in volatility could end here. If the VIX rises back above 25, the market rally could fizzle.

Wednesday’s Federal Open Market Committee’s interest rate decision will be the first big news in the coming week until Friday’s third-quarter GDP is released. The ongoing concern about the euro zone debt crisis will continue to be at issue. The low-expectation investing environment may reduce “headline risk” and give the bulls the edge over the next few sessions.

We taken the hedge off of our model portfolio which closed Friday at $1,694,454, while portfolio#2 finished at $1,747,721.

Happy Father’s Day,

Michael

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Bulls Take a Breather as Momentum Slows

April 26, 2010

Friday’s 70 point advance pushed the Dow Jones Industrial Average above 11,200 for the first time since September 2008, marking the eighth straight weekly gain, an achievement not executed since 2004. Momentum was slowed today by Citigroup (C), who declined as the U.S. Treasury began to unwind its stake in the bailed-out bank, and Goldman Sachs (GS) which slipped ahead of its testimony before a Senate subcommittee. The Dow was still able to eek out a gain that translated into a new 52-week high, but the weak close left a feeling of lack luster performance.

Only 13 of the 30 Dow stocks closed higher with Caterpillar (CAT) leading the way, while financial  shares including JP Morgan, Citi, and Bank of America (BAC) were among the decliners. The S&P 500 and the NASDAQ both closed slightly lower after setting new 52-week highs on an intra-day basis.

Traders may be on the cautious side due to this week’s Federal Open Market Committee (FOMC) policy announcement. Though the Fed is not expected to raise interest rates, the recent strength of economic data has some committee members calling for a tightening of monetary policy. Changes to the language of its statement may be key in determining the timing of future increases in interest rates.

In other news, ongoing concerns about the Greek debt crisis sent the dollar higher resulting in lower oil prices. Additionally, crude supplies, which are anticipated to increase in this weeks inventory numbers, are pushing prices down to the $80 per barrel level, signaled by OPEC to be desirable. Gold, however, was able to increase by 30 cents, to $1154 per ounce, despite the rise in the dollar.

I never tire of reporting that our model portfolios continue to climb with our hedged portfolio closing Friday at $1,854,360 on its one year anniversary, representing an annual return of 85.43%. More outstanding is our unhedged account which closed at $2,138,713, a gain of over 113% in less that 10 months.

To learn the strategy that has produced these stellar returns, go to http://optionsprofitzone.com and download our e-book “Winning the Race to Financial Independence” or purchase the “Options Profit Zone Home Study Course”. You may also follow the links on the right hand side of this page.

Michael