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Tuesday, January 6, 2009

Oil vs Gold

Some of my readers may be confused on what I'm looking to invest in Q1 of 2009..
  • Gold miners (not gold) as a play, but a careful. When GDX was at 17 it was a no-brain-er, at 32, it may pullback before moving higher. Notice that GDX would not move below 28.50 in the last downswing. If it breaks this number, I'd be concerned of a free fall. If it finds the bottom at 29-30, I'll buy some and put a stop-loss at 28. I'll take 1 - 2 buck risk for a potential 5-10 dollar gain.
    As previously posted, I moved out of GDX in force back on the 17th.
  • Gold itself I will not purchase until it approaches 600 an ounce. I will not chase gold at these levels.
  • Oil was extremely cheap last two weeks in December, with DXO hitting 1.75 range. Oil since then has recovered somewhat. I'm holding onto my positions but not adding to them. I'm split between USO, UCO, and DXO. I started looking and buying oil around 12/19/08.
  • I do not like oil companies, as a short or long term investment. The new administration may not be friendly to oil. Therefore I do not want to hold oil companies since an Obama announcement may tank the oil stocks. If you want to go long oil companies, the ETF named OIH is one of the better ones.
I found a two week old video (slightly late) on analysis on gold vs oil. Its pretty interesting. I recommend you watch it to show the valuation of gold vs oil, and why oil may raise (50-60 a barrel) and gold come down, to bring the two commodities more inline with each other.

Oil futures are already close to 50 (about 48). I may start to lighten some of my positions as it crosses the 50 mark.

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