The market moves this month have been so fast and furious that a trading strategy like mine that rotates monthly feels painfully slow…not that a more active strategy would have done anything except perhaps pile more money into the precious metals due to their scary upward momentum. The US 10 year treasury yield briefly fell below 2% last week and is still hovering near the low yields seen in the 2008 panic. I have a growing urge to hedge these gains in treasuries and gold and/or outright lower position size, but I have no quantified mechanism for such an exit. Knowing how late I was to the gold party, and seeing my position sporting a 7% gain in just under two weeks is also making me very suspicious. Just as 2% on the 10 year is providing strong psychological resistance, I suspect that $2000 on gold will also be very tough to crack and sustain in the short run. I will yet again be looking for excuses to move to cash…making money this month while “everyone” (i.e. common stock holders) is losing is producing some vague feelings of guilt (!) as well. I didn’t expect that.
When I made money trading currencies, it never felt like “everyone” was on one side of the trade or the other…
Posted by Ed Mamula under
Narratives
UPDATE (Sunday 8/7 — 9 PM New York time): Gold futures gapped up greater than 2%. Treasuries initally went HIGHER and now sit at the flatline from Friday’s close. Given the fact that treasuries are not selling off at the moment, I feel even less inclined to chase gold…if it comes in a bit, I will buy some, but in the worst case, I won’t be owning any gold this month.
UPDATE 2 (8/10/2011) : Although it makes me queasy, I did pull the trigger and buy December Gold at @1772.6. I feel that I deserve to be flogged for chasing, but since the Fed just announced an extension of ZIRP for 24 friggin months, gold may be a good buy even at these nosebleed levels, because we may very well be in a negative real interest rate environment for some time to come.
UPDATE 3 (8/11/2011) : CME raised gold margin requirements yesterday. In my view, it was a series of margin increases that broke the back of the rise in silver a few months ago, and I fear that this could be the first shot that leads to a correction in gold prices. I am out at 1786 with a small profit of 0.75% before commissions.
UPDATE 4 (8/11/2011 5 PM) …and back in long at 1766.5…clearly I won’t be happy until I lose money 
UPDATE 5 (8/12/2011 5PM) …now taken full position at average price around $1740. Time to let the chips fall where they may and stop being such a piker.
…so clearly I have not been executing according to plan this week, and I feel ridiculous for being in at such a high price…not only that, all this talk of gold has the Google ads on this site showing me Glenn Beck shilling gold, which is something I could do without. 