Questions, Questions: Gold, Aussie and Kiwi Dollars

cryptogon.com
Monday, Feb 2, 2009

WARNING: This is not a recommendation to buy, sell or hold any financial instrument.

I’ve received some emails from Aussies and Kiwis who are thinking about buying gold.

In summary: Hold off for now.

I looked at the U.S. Dollar Index, but that thing is so blurry, I can’t make much sense out of it. I see a lot of overhead resistance as well as a lower pivot on stochastic slow. I’m going to guess that upside potential on the dollar is limited and that there’s a marginally better chance of a move lower.

The picture on the Aussie dollar (AUD/USD) is also VERY blurry. If I was forced to make a call, I’d say there’s a 40% chance of a retest to .6000 and a 60% chance of a strong move higher. If .6000 doesn’t hold, the next stop is .5477.

The Kiwi dollar has wrecked in an astonishing manner, however, there’s a hard (monthly) support at (NZD/USD) .5026 just ahead. That’s a low from 1993. Shorts are very risky here. Any squeeze will drop the price of gold (priced in NZD) and provide a better opportunity for anyone looking to buy. I’m going to gradually start buying NZ$ again, since I’ve been holding off (leaving it in USD) during this crash.

If the squeeze materializes, very strong overhead resistance begins at .5928 and .6258 is the 38.2 fib retracement on the monthly.

• A d v e r t i s e m e n t

Now, if it slips below .5026, the next stop could be .4788. Below that, around .4000.

Let’s quickly consider EUR/USD. It looks like there’s some downside potential into the 1.240 zone, but, again, while there’s potential to retest the low, it doesn’t seem worth it for shorts.

Does gold know something? We’ve got a break out higher on the weekly channel.

A weekly close above the upper channel line is a good thing for gold longs, right?

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Well, you would think so, but my guess is that there’s going to be a concerted effort to keep gold rangebound (under $1030). While I won’t be selling even one gram of my physical gold, I’m going to buy deep out of the money February puts on GLD just in case things get weird again. I’ll do this as soon as Monday if it’s an up day.

What do I mean by weird? I mean that the U.S. Dollar Index somehow breaks out higher, above 88.

Don’t get me wrong, I’d like nothing more than for those puts to expire worthless, but gold is closing in on a major make-or-break level around $1030. Longs, you know the drill. Either this is it, or it isn’t. So many goldbugs are speaking in tongues now. Will it go to $1500, $2000, $3000, some wonder…

This worries me. A lot. I hope they’re right, but I’ll be taking those February puts anyway.

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