Gold prices are setting fresh three month highs
As gold prices keep marking new highs we are embarking on a quest to devise a sound strategy on how to trade it this week. Since fundamental factors are supporting prices really well we believe that this is a good time to look for opportunities to buy calls.
The first level that we have identified to buy daily calls is last week's highs around 1332. As of writing prices are above 1337 so it would take a five dollar move in order for our position to be triggered. We believe the level could be reached in the next 24 hours.
With new developments in Ukraine and the threat of the country's default seeming quite real, we think that the geopolitical situation is a very big part of the bullish gold story. Investors are seeking safety in these tumultuous times and good old gold is certainly providing it.
We have social unrest in Venezuela and Thailand yet, so the escalation of these nuances could prove to provide more upside pressure on the price of the precious metal. Of course, nobody knows how long it will go on, but separatist moods in Ukrainian region of Sevastopol where there is a Russian military base cannot spell quick resolution of that conflict.
While we are of the opinion that the Federal Reserve will continue to reduce the pace of treasury purchases, there is a very long period ahead that can't really put a hold on low interest rates policies. The world is not experiencing the fastest pace of growth, so major economies remain fragile.
With the Chinese Dragon seemingly tired there is no telling when are we going to see some financial turmoil in that part of the world. Exponential rise in credit will certainly hamper the economic prospects for the whole Far East region. Gold may yet again be looked as a safe-heaven bet.
Stay tuned to our daily updates on our strategy to trade gold this week in the comments section below.