Big Picture Trader

Gold Stock are the Go, Newcrest in particular

2008-12-22T13:38:00.002+11:00

Newcrest is unhedged and in fine form, its input costs have improved due to lower oil and labour costs.

The equity market has finally seen a ray of hope and so have equity-linked mutual

While a majority of the equity schemes generated one-month trailing returns in the range of 1-6 % as on December 17, ’08, there are a few schemes whose returns are as high as 10-11 % for the same period.

However, the biggest gain during this period has been observed in the case of world gold funds. Currently, there are only two such funds in the country — DSP BlackRock World Gold Fund and AIG World Gold Fund — and both these funds have shown an outstanding recovery. While the former’s one-month trailing returns stand at a handsome 43%, the latter has managed to generate 35.2% during the same period.

These gains can be attributed to the outstanding recovery seen in the stock prices of gold mining companies across the globe. Over the past one month, the stocks of many of the gold mining companies in which these gold funds invested have generated high returns ranging from 48-70 %. These include stocks like New Crest Mining, Barrick Gold Corp, Newmont Mining, Lihar Gold and Randgold Resources, among others. The FTSE All Gold Mines Index and S&P 500 Gold Index have both returned about 65% during the period.

Gold funds are different from gold exchange-traded funds (ETFs) and should not be confused with the latter. Gold funds are MFs that invest primarily in the stocks of companies that are actively into mining of gold and other precious metals like platinum, silver and also diamonds. Gold ETFs, on the other hand, invest solely in pure gold. Since gold funds invest in equities of gold mining companies, their correlation with the equity market is much higher than that with gold bullion, and hence, they are known to move in tandem with the equity market.

Both gold and equity have gained momentum in the past month, despite the commonly known inverse relationship shared by these two asset classes. While on the one hand, the BSE Sensex has gained about 12.7% since November 18, ’08, on the other hand, gold prices in India have risen about 10% since then. If one were to analyse the returns on a global scale, international gold prices have gained about 17%, while the Dow Jones has increased about 5% over the same period. Hence, it is interesting to see these two asset classes moving in sync with each other, even though they had a high negative correlation over the past one year, at -0 .5.

Buy Lihir at Market

2008-12-19T10:36:00.000+11:00

10% stop. trading plan to follow.

double bottom room to run

Stopped out of OZL

2008-07-29T15:06:00.001+10:00

Looking to reenter when we get a low

Above: the GST Unweighted Precious Metals Composite (Gold, Silver, Platinum)

2008-07-16T13:02:00.002+10:00

SPX Target

2008-07-15T16:37:00.002+10:00

Look for 1097 on the S&Ps trip to 971. Despite the inevitable hysteria from the long only brigade, that is only one degree past a normal correction, not Armageddon.

Trade Number 1

2008-07-13T14:17:00.003+10:00

Buy OXR.AX ASAP with a safety stop at $2.00, target $4.00 with a trailing protective stop to be recalculated weekly.

Confirmation of expected move in gold

2008-07-13T14:12:00.002+10:00

My target, technically is 1500, a wave three up move with two 8 % corrections.

A conservative trade here would be to buy OXR.AX or Newcrest. I prefer Oxiana, because it is oversold and only just recovering from the Zinifex merger, the low zinc price and deleveraging of the australian share market.

It is not the quality of the hunch, but the discipline of the risk management.

Gold Technicals - ready to run to 1500 now imo

2008-07-04T15:04:00.002+10:00

This view is aligned with:

1) Fundamentals -- move to financial assets with no counterparty risk.

2) Committment of traders on the CBOT -- formation bullish

3) Big Bull since 2001 -- They say the trend is your friend.

We need to design a trade that takes advantage of a *possible* move to 1500 for gold, taking in consideration the fact we can be wrong. the next post will consider such a trade.

This is where I post trade plans going forward

2008-07-04T08:33:00.001+10:00

Really important to define the trade and plan it and then trade the plan. The purpose of this blog is to "keep myself honest" and maintain discipline. This blog will also give me the opportunity to demonstrate that one can drill down from a "view" about the world economy, geopolitical trends, long term cycles to select stocks that will perform and then use technical tools and trading discipline to extract the largest gains.

As for the "ethics" of trading, as we enter a major bear market in financial assets and high levels of inflation, only the fleet of foot will preserve wealth. The next ten years will see the biggest transfer of wealth from those who play by the rules to speculators of all kinds. Massive debt and the inflation needed to accomodate it means the world has been made safe only for the fleet of foot. Further as traders manage risk, they perform, with their capital, a very important social function.

Being a stock/commodity trader is therefore both personally prudent and ethically moral, and avoiding the pitfalls (failure to manage risk, gambling ect) should provide a great training ground for discipline and personal growth. Traders have nothing to apoligise for, therefore.