The Situation
Gold has been trading reliably within the $1,540 – $1,800 range for the
last 15 months. Each time the gold price has approached the outskirts
of that range, it's bounced off and headed back to the middle.
But gold's recent bearish momentum has us concerned that it may soon
breach the bottom of that range. And if it does, gold could swiftly move
lower from there; its next support level is $1,450, and after that, the
mid-$1,200s. We see a distinct possibility that gold will temporarily
retreat to that mid-$1,200 area in the next few months, which would
amount to a 20% loss from current levels.
There's no reason to
panic: the fundamentals of the gold bull are as strong as ever, and the
correction will be temporary. But that doesn't preclude it from being
painful.
What to Do
If you
can comfortably absorb a 20% loss on your gold holdings without becoming
an insomniac, you needn't do anything. Sit tight and wait for gold to
bounce back. But if you're overweight gold (more than 33% of your
portfolio), are leveraged to the point that a pullback will force you to
liquidate positions at unfavorable prices, or if you're just plain
nervous, consider buying puts as an insurance policy.
We're
using the GLD ETF for this trade. GLD originally represented 1/10th of
an ounce of gold, but its ratio to gold has drifted a bit since its
inception. For our purposes, that's unimportant; what matters is that
GLD mirrors gold's price movement almost exactly and is an easily
tradable proxy.
Here's the trade:
Buy the May 2013 GLD puts, at a strike price of $147, for $1.85 or
less. If gold (not GLD) closes a day above $1,630, sell the puts for a
partial loss. Otherwise, we will provide further instructions on when to
sell the puts. For every $10,000 of gold you own, buy one put contract.
Assuming you own $10,000 of gold and buy one put contract, here's a
rough estimate of what your gains and losses will look like at various
gold prices:
Gold Price Gain/(loss)
on Holdings Gain/(loss)
on Puts Net Gain/(Loss)
$1,600 - $(185) $(185)
$1,500 $(625) $(3) $(628)
$1,400 $(1,250) $964 $(286)
$1,300 $(1,875) $1,932 $57
$1,200 $(2,500) $2,900 $400
Because we don't know what the implied volatility will look like, we
can't calculate the exact future prices of the puts. The above are
minimum estimates of what the puts will be worth – in reality, they'll
probably be worth a bit more.
What Not to Do
Don't sell
your gold. This weakness will prove temporary, and several catalysts are
lurking that could send gold to the moon without notice. Sovereign
default, war, inflation – any one could ignite a swift rally in gold,
and you don't want to be caught underweight when that happens.
We designed this trade as an insurance policy – to protect our downside
without capping our upside during what we expect to be a rough next few
months for gold. If gold's recent weakness makes you nervous, consider
using the trade to blunt the pain of a further fall.
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Untuk maklumat lanjut mengenai pelaburan/simpanan emas yang betul
ataupun Public Gold, boleh menghubungi saya di 014-5413852/ 0111-9067475
Dari laptop admin,
Amir Saifuddin bin Mohd Fauzi
01119067475 / 0145413852
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