Tuesday, October 29, 2013

Exited Two Positions at the Open; Gold Update

Yesterday's action generated some sell signals for two of my positions. Per my system, I sold them today at the open.

  • I exited the second half of Guggenheim Solar (TAN) at $36.81. That's a 22% gain on that half of the position, and an even bigger gain on the whole thing. What a great run for TAN!
  • I also exited all of my PowerShares DB Agriculture (DBA) at $25.32, a 1.4% loss. It's a shame, but the breakdown became apparent yesterday.

What About Gold?

Gold gave back its gains yesterday, which is worrisome. It didn't generate any sell signals on my positions yet.  And of my six precious metals positions, only one is in the red. I'm watching to see if gold rallies after the Fed meeting this week. Many Fed watchers are now saying the Fed will start tapering is QE program on March 14. Sure, sure it will. You do know we're going to have another budget battle in Washington between now and then, don't you?

Certainly the sentiment in the mainstream media remains profoundly bearish on gold.For example, if you follow that link, you'll see that the Wall Street Journal reports that Thompson-Reuters GFMS says that "Central banks are on track to cut back their gold-buying by 34% in 2013." At first glance, that looks bad.  But GFMS really means that Central Banks are still forecasted to buy gold, just at a lower pace.

In fact, Central-bank purchases may total 350 tons in 2013, the World Gold Council predicts, after they added 534.6 tons last year, the most since 1964.

Now, doesn't that sound more honest than what the Wall Street Journal wrote? And anyway, these are predictions about what the Central Banks will do. The proof will be in the pudding.

It would be paranoid (probably) to think that the Wall Street Journal is deliberately misleading readers. Instead, I believe that the mainstream media has settled on a negative narrative for gold, and they report facts in a way that suits that narrative.

One significant bearish fact remains:  Holdings in exchange-traded products (ETPs) have contracted every month this year, sending assets down 29%, according to data compiled by Bloomberg. However, it is also true that the selling seems to have ebbed.  We will see what November brings.

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