Commodities Essential - August 9, 2011

Alert: a potential Fed-led bounce in risk appetite could dictate gold price action in the near-term.

Let’s adjust stop-loss levels on IAU again … 

Gold has surged higher again as investors continue seeking safety. But should today’s bounce in commodities and some other assets be sustained, I think gold could pull back. 

The FOMC announcement minutes ago suggested the Fed Funds Rate will stay low until 2013. That propped up gold even more as gold’s lack of yield can compete better for investment capital in a lasting low-yield environment. So far the FOMC comments on an even more extended period of low rates is being trumped by the idea that the economy is, indeed, weaker than they expected — i.e. risk appetite is hesitant to jump on the low rates mantra.  

Our position in IAU (iShares Gold Trust) is in good shape and right now I am confident in the long-term potential of gold. But let’s further tighten up our stop-loss anyway; it makes sense to mitigate the risk of a short but sizable unwind in gold prices while at the same time staying exposed to further safe-haven upside potential.  


Trade Essentials. 

IAU(Last Price: $17.19)

CANCEL AND REPLACE your order to SELL ALL your shares of iShares Gold Trust, symbol IAU, at $16.30, STOP. NEW PRICE: $16.90, STOP; this order is good till cancelled.