US PRESIDENT ELECTION AND GOLD/SILVER - Commodity Calls - 1

2012 U.S. Presidential elections and The Poor Retail Investor

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?Trading is a habit inculcated over a period of time and it is even more addictive than all of the worlds drugs or alcohol put together. It ultimately goes into the veins of the trader who cannot live without it?

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Times are changing in all aspects of life with the rising prices? more so in the commodity markets and even more so in the precious metal markets. Markets are flush with the U.S. distributed stimulus funds and almost nowhere for the retail investor to invest , we find a major chunk of the investment in commodities mainly gold because of the fact that it is considered a safe haven investment. Silver has also caught a major fancy with its current meteoric multifold rise.

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Past 10 months?.

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Last year the moment silver crossed $17.73 (INR 28000) the retail investors started buying but with a small target of $23.23 (INR 35000) in mind. After $24.65 (INR 37000) we could see exiting of all open long positions and creation of short positions more and more till $29.40-$30.20 (INR 44000-45000). Then we saw stabilization for a very short time in $27.45-$30.50 (INR 41000-45000) range. After this what happened is history, people could not book losses in their open short positions by themselves? Their respective brokers had to square up their positions as per their margin limitations or financial credibility. In India many people even held on to their positions till $49.20 (INR 72000) by selling their properties and jewellery? and there after being misguided by their brokers (mostly bucketeers/dibba wallas in India) that silver would go on to $68.00 (INR100000) on crossing $49.20 (INR 72000), they squared up their short positions in the $49.20-$50.00 (INR 72000-73000) range. Thus all their jewellery and properties were lost as if in a casino. Those who were literate (and financially sound ) enough to get reports from respectable consultants held on to their shorts but they too against their consultants advice exited their shorts at around $47.71 (INR 68000) and created even more open long? positions around the $45.12-$47.80 (INR 65000 ? 68000) levels. There were also cases of people being long in the lightning fast bull rally around $43.40-$45.50 (INR63000-66000) but could not exit at higher levels of $49.54 (INR73000). There after the long positions are still there in some cases even after seeing lows of around $33.34 (INR50000).

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Current Scenario

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Silver is currently trading at $40.60 (INR60000). The Investors with open long positions @ $45.50+ (INR66000+)? are still waiting for their prices and even expect good profits. They mostly have deposited margins till $30.50 (INR47000). So they are not exiting now as they all forsee a weak dollar policy coupled with stable near zero interest rates as well as all the other international? crisis all over Europe. News comes in almost every day about some crisis or the other. People therefore do not want to exit their open positions at any cost. You ask anyone these questions?

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Q: What about silver?

A: Rise to a minimum of $68.00 (INR100000) and there? after $82.00 (INR125000).

Q: what abt a dip?

A: Maximum $30.75 (INR48000).. worst case $27.20 (INR44000).. we have the margins? why exit?

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So we can clearly see here that the U.S. with its stimulus packages / near zero interest rates / weak dollar has blanketed the visions of the retail investor who is not at all looking into next (the great U.S. Election) year. They have only the safe haven investing in gold in mind and taking silver to be the same. They are not seeing the options clashing or the U.S. elections ahead. Anyways in order for the fund managers to make money someone has to loose money ?money changing hands? and who better than the unknowing retail investor who has been duped by these so called FUNDS over and over in the past.

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In India (and other countries also) the bucketeer or dibbawala will be the person making money in most cases as they have a hold of more than 50% of the volume in commodities. These bucketeers have become even stronger in last years bull rally coz the small investor lost heavily. Now it is the turn of the HNI?s and the Big retail investors to loose their sheen.

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YEAR 2012

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This should be a good year for all major equity markets as we all tend to follow the U.S. bourses. The present Obama government would want their voters to have full confidence in the present governance and economy. For this they will start favoring a strong Dollar policy / strong equity markets / good GDP?s / Very good labor/payroll numbers and other economic factors which help boost the economy? and all this for the elections ahead.

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Now this is what the retail investor has forgotten or is trying to oversee or has been misguided by the current economic conditions. They have very easily forgotten that the data (some numbers which can be played with) portrayed is all in the hands of the sharks and whales and never as per actuals. One should always have an in depth knowledge of the terrain one is treading on before taking steps forward or else they will loose their way just like most of the small investors lured by the commodity markets shine and glow.

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All this when translated into figures should read as : Gold could rise further and make new highs of around $1625 - $1635 (INR 23500-23800) maximum till the current quarter or even as early as mid August and then those highs should remain intact in the current year. Thereafter Gold should fall to around $1400-$1450 levels. Silver could also rise a bit further till $43.55-$45.20 (INR63000-65000) and fall back to much below $30.50 (INR47000) levels and could touch $23.50 (INR37000) also. The fall in Gold Silver would again cause the small investors heavy losses. They would now be exiting their longs in both Gold and Silver at these lower levels. If the markets play around these lower levels for some time then maybe the HNI?S would also reconsider their decisions of holding on to their longs or exiting on the spurts.

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This would also continue into next year with markets being steady with the 2012 U.S. elections looming ahead and Gold being lower as it is considered as a symbol of world (read U.S.) economic conditions being favorable for investors. Silver should also follow suit and remain lower for the major part of 2012 barring unforeseen conditions.

Source: http://www.mudraa.com/trading/96327/0/us-president-election-and-gold-silver.html

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