A Bull’s Stand Against Gold’s Panic Selling

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TRANSCRIPT

Good morning. Down more than $100 and 1397. We did get down to 1384, I believe. What are you waiting for? 1300?

Well, at this point, we look at the retracements in terms of the technicals and we had a 38% retracement from the 681 low to the 1920 high which was 1450. We blew through that which was a 50% retracement so we look to see if it reacts if it’s down there. Any guesses as to how long it would get there? at this point it would happen probably Wednesday.

Factually, this has been a pretty drastic drop and volatility in the options market has exploded overnight and just a lot of margin calls and people liquifying their positions. Most people that bought gold last year are under water so they have to liquidate their positions.

..Want to explain it with these big fundamental explanations, Thomas Rosengren with Cyprus having to sell their supply.

Do you think there’s anything to do with that or is this a couple of traders that got caught very wrong. I agree with the latter. Ithink it’s a convergence of a lot of different factors. There was a lot of negative sentiment. We had Goldman coming out with their bearish short call and then we had sock gen and people were getting nervous and the loans liquidate. Those sometimes give you some opportunities to maybe catch an overextension and get long and just what happened, and it overextended there and people can get short and faded,

Basically, a lot of people were bullish at 1800 and they’re not doing well right now. Everybody’s bearish here so maybe you should look for an opportunity. Is it possible to cut through and say this is what gold failed to do despite all of the hysteria and this is why we are selling now. Exactly. The fundamentals are there and it’s not responding in a way you would think it would, so you have to look at that.

You can’t buck the trend, but right here, how can you be bullish. Unlike other assets, it doesn’t generate dividends, therefore, as it comes down, do you find yourself in uncharted territory or do previous price levels give you a clear map that at what point it is likely to break. once we broke that 1525 level, that was the true bottom.

So you look at the psychology of the market and try to anticipate, I guess. 1300 is 50% and see how it reacts. 52% retracement is 1150. A pretty large decline. A lot of our viewers like to have some exposure to gold either through the outright purchaser through the ETF.

Should your strategy at this point vary depending on which avenue you took? No doubt, people can’t be too overexposed to it because of the volatility. I think you should always have some exposure to it for currency risk, but you have to keep that exposure to a minimum and be able to weather the storm and when the market goes down you are able to buy more, basically. If you’re feeling aggressive here and say we get down to 1300 and you want to take a step in, is the ETF, you think, the easiest way to go?

The ETF you can put on options strategies also that give you less exposure to the downside and give you upside exposure, but you need to be careful with the margins because they can really hurt you. Some people know exactly what you mean on a day like today. Thomas, thanks a lot. A huge story.Thomas joining us from the NYMEX.

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