Time to Buy Gold?

By Erik Gebhard of www.altavest.com

Right now were looking at the August gold contract, as most
traders have rolled out of June, as the First Notice Day for
June futures is Friday (meaning all long contracts need to be
offset or else they will enter the delivery process). Measuring
from the low on 12/31/13 near $1187 to the March 17 high of
$1392, a 61.8% Fibonacci retracement level targeted a
pullback to the $1264 area. Prices have declined through that
target area, and have slid through the $1250 area and into the
$1240 range.

As equities have soared to new highs, U.S. Treasury
securities have also found strong demand, pressing yields
lower to levels not seen since last year. Historically, it is not
often the case when broad-based equity indexes and debt
instrument prices move so firmly upwards with such positive
correlation. We expect that within this low volatility, quiet
volume, and narrow breadth equity environment, this
dynamic will soon revert back to a historical norm, with
equity prices more likely to track alongside debt yields, not
debt price.



All the while, beginning on May 6th, the June $US index has
firmly rallied, gaining about 150+ bp. Against such a
fundamental landscape and headwinds, bullish gold
sentiment faded, leaving the market vulnerable to a washout
below recent support near $1280. The recent plunge in gold
prices can also be tied to the last trading day for June
options.

Buying the August gold contract right now would be quite an
aggressive move for the typical speculator, nearly akin to
attempting to catch a falling knife without cutting your hand.
Yes, its possible, but we see the odds of successfully doing
so as slim.

The large price gap above the market, measured from the
May 27th low near $1291.50 and the May 28th high of
$1267.50, will however likely be filled in, its just a matter of

when. Wed give the market more time to consolidate and

build some sort of base of support, and then attempt to
lightly enter into fresh bullish positions.

Bulls will note some promising macroeconomic
fundamentals developing. India just relaxed its regulations
on importing gold. We know that Germany has requested
audits of the gold that it holds offshore. Austria reportedly
has 80% of

its gold holdings stored in the U.K., and now they are also
requesting an audit of their offshore holdings. Also, it was
reported that Russia recently sold Treasury securities and
purchased 900,000 ounces of gold. Russian leader Putin said
that not only will Russia continue to favor hard currency,
but that China will too, and that they will both take measures
to ensure such reserves are held in a rational and secure
way. This is another way of saying, Theres nothing more
secure than holding such assets close to our vest, in our own
yard.

Apparently, some trust is wearing thin among many
geopolitical players, as nobody wants to find out that the
valuable gold they thought they had has somehow gone
missing. Further, its clear that gold has moved to the
forefront of these sovereign nations minds, which infers a
lack of faith in paper currencies. With sovereign nations now
seemingly interested in an accounting of their offshore gold
holdings and possible repatriation, such a sentiment could

help keep a floor under gold prices such that large dips will
be viewed as buying opportunities.

About the Author: Since 1997, Erik Gebhard has been cofounder of Altavest Worldwide Trading, Inc.,
(www.altavest.com) a commodity futures and options trading
firm. Altavest, in conjunction with its educational affiliate,
FuturesANIMAL (www.futuresanimal.com), educates clients
via webinars and live seminars. Altavest offers a proprietary
user-friendly options trading platform with daily suggested
trades and risk and profit controls, as well as full-service
trading advisors at discounted commission rates and
managed accounts.

Risk Disclosure: 2014 Altavest. There is a risk of loss in
trading futures & options. Past performance may not be
indicative of future results. Proprietary automated trading
software cannot be resold.