It looks to me as if the summer here is coming to an end.  Cool breezes in the afternoon, very cool nights, and shifting light patterns tell me fall weather is moving in.  As it is with everything, the cycle continues. Hot weather turns to cool weather, and cool weather turns to cold.  Keep this cycle in mind when trading markets, especially the markets that are hot.  Folks just love what is hot, as the question below reflects.

I want to trade gold in the futures markets.  Please give me some important suggestion about gold market.

My important suggestion to you is that you consider one word about the gold market – bubble.  Now this might be good in your thinking, as I have no clue  how you plan to trade it, but if you are considering the long side of a trade, consider that the price of gold has risen dramatically in the last five years, some 300 percent, give or take. 

Maybe gold has more steam in the engine, but one has to ask, “How much?”  I understand that economic uncertainty and the volatile currency market are driving the trade, but we saw much of the same oh, say, back in 2008 when factors drove buyers into crude oil, as crude oil was climbing and climbing, and well, climbing some more.  We all remember crude oil dropping from $147 per barrel all the way down into the $30 range.  Quite the fall, eh?

I understand that gold and oil are different.  One commodity has true value and the other has perceived value is a key difference.  This tells me the price of one is easier to predict than the price of the other.  Nevertheless, speculation drives both, and what we are seeing now is speculation, especially with the sheer number of folks out there telling us gold will reach astronomical highs in the near future.  

Maybe those soothsayers are right, and maybe my comparing the rise in gold prices to the recent rise and fall of crude oil prices is, well, unfair, but it is hard to argue that gold has enjoyed a strong upward trend for some five years now with a strong spike in the last two.  One has to ask if this trend can continue.  If you think it can, then a long trade is in your future; otherwise, watch carefully.  The short trade just might be your ticket.

Me?  I am looking forward to a cool autumn when the heat of summer is past.  I am looking forward to the temperature dropping, which just might allow a less heated perspective on just about everything going on in the world today.  Yes, the fall season has always struck me as time of calm …

Whoa!  I just remembered the market collapse in the fall of 2008.  Dang it!

Trade in the day; invest in your life …

Trader Ed