Zak Mir’s Top Pick for March
“In this particular game of Russian Roulette there were only blanks in the barrel, and the winners were those who stayed long from November.” Recommendation My call for March is to a short term buy of gold on the basis that bulls of the metal have, or are very close to, capitulating. Certainly the support for the “supercycle” rally in this market appears to be no longer the mainstream view and the first sniffs of fear for the bulls are beginning to appear, usually a sign that a short term bottom is in sight. Similar to the curious case of the Fiscal Cliff and the ICAP example described above, reports that billionaire George Soros has cut his holding in half in the benchmark SPDR Gold Trust (GLD) on February 16th has added fuel to the bear stories and, at the time of writing, has temporarily pushed the metal below $1,600. Given that this is the very same week that it was announced that Mr Soros had pocketed a cool $1bn through shorting the yen, there are unlikely to be many traders who say, “Soros is selling gold, I am buying.” But that in my opinion is the trading trap. Even if this is not the bottom for the post September 2011 retracement for gold, I would suggest that as far as a selling climax trigger that leads to capitulation, that this is a decent example. You are of course welcome to wait to see whether there is further downside back towards the main post 2011 support zone towards $1,500 - $1,530, but I would venture to suggest that in terms of an event to flush out the bulls BEFORE a new leg to the upside begins, then this is it. Technically, the position with gold is that a line of support from 2011 can be drawn through the February 15th low of $1,598. I am writing this 10 days ahead of publication and so even if the $1,598 level is not actually the 2013 low, we are, in my opinion, now in the buying zone, especially given the positive RSI divergence between the lower February support versus January’s $1,626 floor.
Those who feel that this is too much of a catch a falling knife exercise would wait on a weekly close back above the January floor around $1,630 as the big buy signal. I personally have seen enough evidence to have gold as my March Buy Bet however. A stop loss just below last August’s low at $1,584 - perhaps around $1,575 should be run. My first target is back to around $1,680 - $1,700 — sight of all the converging moving averages — before the end of March.
Recent Significant News February 15th – Billionaire investor George Soros is reported to be increasingly bearish on gold. Soros cut his investment in the SPDR Gold Trust (GLD) in half during the fourth quarter. The $8.5 billion Soros Fund Management now owns 600,000 shares of the gold ETF, worth an estimated $97 million. That’s down from 1.3 million shares, worth more than $227 million, in the third quarter – CNN Money February 15th – Gold fellow below the key psychological $1,600 on Friday February 16th — a new six-month low. According to Citigroup’s Tom Fitzpatrick “We believe we have just reached the ideal pivot for gold to form a base and move higher as it did after the 16 month consolidation in 2006-2007,” wrote Fitzpatrick who now has a “...a minimum (price) target of $2,055-$2,060.” – Businessinsider.com February 1st – “Is The Bundesbank Preparing For Global Monetary Collapse?” The German central bank announced it will begin withdrawing part of its massive gold holdings (10% of world holdings) from the United States as well as all its holdings from France. By 2020, the Bundesbank says it wants half its gold reserves stored in its own vault in Germany.
March 2013
| www.financial-spread-betting.com | 39