POSITIONS: long US Dollar Index (UUP), long Canadian Dollar (FXC), long Chinese Yuan (CYB), short Euro (FXE), short Yen (FXY)
While we don’t currently have a position in Gold (GLD), we’ve been very active in foreign currency as of late. We did make the call to sell our entire long Gold position in both the Hedgeye Portfolio and Asset Allocation models on December the 6th. I’ve been following up with notes on why (Early Look note from December 17th, “The Golden Haze”) since.
The question in my mind right now isn’t where do I buy gold back? It’s where do I short it?
Gold is competing against rising bond yields. Gold is also fighting the Fed’s policy to inflate. Gold is always a lot of different things to a lot of different people, but the most important thing about gold is its last price.
If gold closes below $1379/oz this week, this will be the 3rd consecutive week of gold closing down on a week-over-week basis. That would be bad for the immediate-term price momentum in gold but, by our risk management score card, its already broken from an immediate-term TRADE perspective anyway.
In the chart below we show the refreshed immediate-term TRADE line of resistance for gold up at $1399. There’s significant resistance between $1, so you can also use that as a range of resistance.
There’s an immediate-term TRADE line of support down at $1368, but it’s a weak one. The more important line to manage risk towards is the mean reversion move down to gold’s intermediate-term TREND line of $1313.
Last year I gave my Dad gold bullion coins for Christmas – this year I hope he doesn’t give them back!
Keith R. McCullough
Chief Executive Officer