Monday, April 27, 2009


One of the non-performers in my holdings is the gold double-long ETN, DGP (the other non-performer being another ETN, oil double-long DXO). I purchased the stock during October-December period. My average cost is about 5% below today's price, so I haven't lost money but haven't gained much either. With all the financial market turmoil and capital dislocation, gold has not performed as many gold bugs hoped for. It's been a dead money, so to speak. The gold spot price is currently $897.

It seems many people love to hate gold. When the price goes up, they say "Oh it's a head-fake, good time to short". When the price goes down, they say "Gold as money is such an archaic concept, not relevant in modern world".

I'm planning to hold on to this stock (or I may switch to GLD so I can write call options against the holding) and I'm prepared to double down if it goes down to November low, as I am scared of the monetary base growth and the ever-growing size of Fed's balance sheet. But just in case, I took a look at the chart of GLD (gold ETF). It looks to me like a W-bottom with a handle. And I'm pretty OK with the current setting, as long as the handle-low holds.

Potential move down for gold this week is Treasury auctions. So far, the "safe haven" play is a battle between Treasuries and gold. This is from Yahoo Bond Ticker on Monday:

"Today the market absorbed a $40 billion sale of 2-yr notes, a $29 billion sale of 3-month bills, and a $28 billion sale of 6-month bills. The Fed took a small step to offset the increased supply with a $7.025 billion purchase of securities with maturities ranging from September 2013 to February 2016.

"Tuesday's auction calendar will be highlighted by a $35 billion sale of 5-yr notes. That auction, the swine flu fixation, and the economic data are expected to be the drivers of Tuesday's trade, but the order of their importance is indeterminate at this time."

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