Tuesday, February 15, 2011

Long Gold (Again)

Due to the volatility around gold prices following Mubarak's resignation on Friday I decided to cover all of my long gold and long gold stock positions for tiny profits. I had been using the 100dma in gold as my pivot level, and with the weekend coming up, and the uncertainty post-resignation I made the decision to cover all positions and reassess once things settled down.

After covering my positions, gold prices continued to fall Friday afternoon, and closed solidly under the 100dma. Prices gapped up on Monday morning, but couldn't hold the highs of the day and once again fell back below the 100dma on the close.

Today however, following China inflation #'s overnight, gold gapped up again on the open and for the first time in 4 days closed back above the 100dma. As a result I re-entered my long gold position, buying HBU.TO @ 31.99.

This is about 60 cents higher than where I closed my position on Friday. That's 60 cents that would have stayed in my pocket had I just stuck to the original plan Time To Go Long Gold Again? that I posted on 2/9. In that posted I suggested using the 20dma as my stop, which never really got close to being triggered. However I consider the 60 cents I "lost" the cost of protecting against increased uncertainty ahead of the weekend. Prices could have just as easily gapped lower given the scenario. Now that things have settled down I feel more confident in the position. While I run the risk of being whip-sawed on this trade, I will likely use the 100dma in GLD as my stop on a closing basis.

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