June 12, 2011
Canadian tax authorities raided the offices of Kitco Metals Inc in an apparent search for evidence supportive of the claim that Kitco has evaded paying taxes. See link: http://business.financialpost.com/2011/06/10/high-profile-gold-trader-probed-in-tax-scam-allegations/
On the surface, this may not seem very interesting and certainly not worthy of disrupting your Sunday, but it could provide a brief window of opportunity to enter (or add to) a position in gold.
If I pull up a chart tracking the price movement of gold, over recent years, it is about as straight forward and easy to read, as charts can be. The chart has a somewhat constant line from the lower-left corner to the upper-right hand corner of the graph, with only a few modest hiccups along the way. Charts like this are great because you can read them from across the room or even driving by, at 15 miles per hour. For the record, I am not an advocate of chart reading while driving, but you get the point.
One problem with a chart like gold’s, is properly timing an entry into the trade. This is where the Kitco story might help. The precious metal markets have been closed over the weekend but will open in Asia; about an hour from now.
Because Kitco is such a large player in the precious metals market, we could see some marginal holders of gold, get nervous and move to liquidate their positions, thereby increasing supply over the very near term – like tomorrow. A quick surge in supply should cause a temporary drop in price.
Because the fundamental story behind gold’s price move has not changed, any drop in price, could provide a better price point from which to enter the trade – at least that’s what I’m thinking.
GLD is an exchange traded fund that tracks the price of gold. The last trade Friday was at $149.24 per share. On Friday, the 50 day moving average for GLD was $146.53. In my opinion, any pull-back to the 50 day moving average, has a better-than-decent probability of turning into a good buying opportunity.
But even with the best laid plans, there always seem to be potential glitches. The possible glitch in this case is, I assume there are tens of thousands of guys, just like me, slumping over their computers doing their weekend research, who may have the same take on the Kitco story. If too many of these other recluses see things the same way, some might jump the gun and buy gold (GLD) before it has had a chance to complete a nice pull-back and thus prevent this opportunity from developing. So the best we can do is make a plan, then sit back, wait, and watch to see what unfolds. Please pass the popcorn.
Enjoy the rest of your weekend!
PS: If you are interested in tracking the price of gold (and who isn’t), here is a link: http://www.kitco.com/market/
Ironically, the link is to Kitco’s website – told you they are a big player in the market.
This material contains the opinions of the author but not necessarily those of Beverly Highland Capital LLC and such opinions are subject to change without notice. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.