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How Far Does Gold Drop?

Commodities / Gold and Silver 2011 Jan 14, 2011 - 11:12 AM GMT

By: Jim_Farrish

Commodities Open any financial website or periodical and you can find plenty to read relative to the price of gold. Why the concerns and selling of gold currently? The short version is it comes down to the economic outlook. The US economy has been gradually improving along with the employment data and that has impacted part of the reason investors were buying gold, an alternative investment. The improving data out of Europe over the last couple of days relative to the sovereign debt issues facing the EU nations has been put to rest temporarily and that is pushing gold prices lower as well.


If speculation comes out of gold prices that will impact the downside as well. The chart below of the world gold index shows the current price at $1359 which corresponds with support (yellow line). If the price breaks below this support level the next support is $1322 and then $1270. How far does gold fall? Good question and one I am not willing to speculate on. However, I am willing to be short gold as a trade (0-13 weeks) opportunity, if it breaks below support at $1359. The first target would be $1322 and then $1279 obviously with the support at those levels.

ProShares Ultrashort Gold ETF (GLL) is another way to short gold with leverage (200%). The risk of the leverage works both way and should be taken into account before making any investment. The move above $30.20 is technically a break from the current trading range. Confirmation of the break would be positive for the fund and a target of $33 would be the initial look for the trade.

If you don’t like trading – ignore this post! If you do the opportunity is setting up currently.

Jim Farrish is the Founder and Editor of SectorExchange.com and TheETFexchange.com.  His primary goal is to educate people about investing.  He has taught workshops locally and nationally for over 25 years, teaching thousands of individuals, business owners, and advisors how to focus on achieving financial independence.  Jim Farrish is the CEO of Money Strategies, Inc., a Registered Investment Adviser with the SEC. The company and/or its clients may hold positions in the ETFs, mutual funds and/or index funds mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. Investors who are interested in money management services may visit the Money Strategies, Inc., web site.

© 2011 Copyright  Jim Farrish


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