Gold Q&A: Answers to our Subscribers' Most Pressing Questions

• Why do you sometimes not suggest opening positions for moves you perceive as highly probable?

  October 19, 2012, 12:00 PM

  Sometime you are pretty sure about a price move but at the same time don't suggest a speculative position or even discourage opening one. So how is this really? Are you really sure of the move (then suggest opening a speculative position) or are you not sure and that's why a speculative position is not suggested?

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• Why do you suggest closing long positions but not opening short ones?

  November 16, 2012, 12:00 PM

  If I am confident enough that I need to take a loss in the face of more impending declines, why am I not confident enough to hold short in anticipation of the same?

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• Why do you suggest looking at each trade individually?

  November 16, 2012, 12:00 PM

  I see the point about looking at each trade individually, but allow me to present you with a different real-world scenario: I will call my stock 'GOLD' and assume it behaves like GDX, but moves about 50 cents for every $1 move in GDX. Consider, please, the following situation:

  1. My BUY price is $34.50, which nets me a total of 9,155 shares. GOLD falls to $33.77. If I exit here, I incur a loss of $6,774, or, let us say, about 200 shares of GOLD…
  2. …At this point, GOLD must fall to $33.10 before I can use my proceeds to buy back in and 'erase' my loss. Obviously, if it falls further I am ahead; but if GOLD doesn't decline to at least $33.10 and instead moves back up, I must now buy back in at a higher price and add to my $6,774 loss.
  3. Now, in the current environment, GOLD could go up or down. I am going to assume that at some point GOLD will return to $34.50 - that's a pretty sure bet. The question is, how much further below $33.77 might it move first, and am I inclined on betting on that move? Again, to break even it has to hit $33.10. To make any real money, it has to hit $32.50 or so. My position is that, in order to risk the 'loss' of my 200 shares, I must be adequately compensated. And of course, that depends on the size/probabilities of a move downward.

  My point is, if I were to look at this trade in isolation, yes, sell now before it goes lower. But that is not always the way to look at it in practical terms. I might suffer a bigger paper loss here temporarily, but there is really little chance of me translating that to a real loss - unless the bull in gold changes. And I am all about preventing losses. If you see anything wrong with my approach, I would appreciate (really) knowing.

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• Why do your indicators flash buy signals when your predictions are bearish?

  July 15, 2011, 12:00 PM

  Your indicators have recently flashed a buy signal while at the same time you were bearish on the market. I’m a little bit confused. Could you clarify the matter?

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• Why don’t you use the Elliott Wave pattern analysis?

  January 21, 2011, 12:00 PM

  I’ve read some of your articles and I’ve noticed that you use technical analysis extensively. However, you don’t seem to use the Elliott Wave Principle. Why’s that? Don’t you think it’s useful?

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• Why is your analysis of gold heavily influenced by the US dollar?

  July 20, 2012, 12:00 PM

  I appreciate greatly your regular analysis, but cannot help but have doubts on one aspect of your technical analysis. It is significantly influenced by the USD index movement, in which when the euro falls, the Index rises and risk assets fall off, including gold (in an environment where inflation is for tomorrow and global growth is slowing).

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• Why would I use gold and silver ETFs?

  December 14, 2012, 12:00 PM

  I'd like to hear an explanation of where security lies in holding ETFs. I hear they are in trusts, but why should anyone be trusted now? I certainly don't trust overseas bullion vaults.

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• Will silver soar to $75?

  November 16, 2012, 12:00 PM

  When gold broke above its 1980 all-time high it quickly accelerated towards new, higher highs, whereas silver is still below its all-time nominal high. When silver breaks above its April 2011 high, is it reasonable to expect it to soar towards $75?

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