Gold Futures and Bullish Strategies

Gold futures have had a healthy correction since making life-of-contract highs of 1923 on September 6, 2011. The retracement back to 1535 on September 26th represented approximately a 20% move over the course of fourteen trading days had gold bugs scrambling and gold bears rejoicing. Exchange margin increases as well as renewed fear overseas sparked liquidation as gold was quickly viewed as a risk asset rather than a safe-haven flight to quality investment.

Gold prices appear to be consolidating just above the 50% retracement level of 1550 and above the long-term uptrend line, which is serving as solid support. Conservative traders may want to wait for a retest of the uptrend line before establishing long positions. A trade above the minor resistance of the 1680 area could then target stronger resistance at 1680 which then based on the technical pattern could target contract highs.

The thing to remember is that this market is an extremely news-driven environment and further deterioration out of Europe or news from the fed typically throws all technicals out the window. We always recommend using stops and or option strategies to hedge open positions in times of volatility.

Different Bullish strategies to consider for those looking to acquire Gold depending on your risk tolerance could be:

• Long Gold Futures (100 oz and 33 oz contracts available)
• Long Gold Futures Options (Debit Call Spread)
• Short Gold Futures Put Spread (Bear Put Spread)
• Long GLD
• Long GLD Options (Debit Call Spread)
• Short GLD Put Spread