No options? Either just buy a put(s) to catch a downside move or at least buy a call(s) to protect your short position?
No metals hedge. I factor gold into the set-up b/c of its importance to price action in the currency. The currency trade gives me all of the risk/reward I want. I'm not looking to insure the trade. I wouldn't initiate it if I was.
So far, so good. Today saw about 80 percent of the upward price action I foresaw for my short entries, resulting in four shorts filled (out of five in the set up). Sold at .7912 avg in. I finish the day above water on each of the four. Looking for .7800 and better. Could see it within two weeks. Bad news is gold's upward action today was only slight, but still enough (together with general run on USD) to account for 40-plus tick upward move in Aussie -- until gold backed up. That back up and flattening on a great day for Pound, Euro, etc., is the only reason why I finish the day ahead in this trade against AUS. But if gold makes move toward 700, my AUS shorts will go underwater very quickly with my stop loss promptly in crosshairs.
Continuing the exposition of my short AUS trade -- which, directionally, is gold bearish. If you're bullish gold, you may be in a herd: ________________________________________ Dec. 4 (Bloomberg) -- Gold may rise for a third straight week on speculation a slowing U.S. economy will erode the value of the dollar, increasing the appeal of the precious metal as an alternative investment. Eighty-three percent of the 30 traders, investors and analysts surveyed by Bloomberg News from Sydney to Chicago on Nov. 30 and Dec. 1 advised buying gold, which rose 2.4 percent last week to $650.60 an ounce in New York. The percentage predicting a gain was the highest since the survey began in April 2004.
I mentioned on 15th Oct............. In the medium term I feel a significant break higher out of the Symmetrical Triangle could be on the cards. This break will test the old highs and move further north. Currently AUD is in a consolidation phase/coil waiting for a breakout. The action has now moved nicely out of the Sym Tri and in the longer term I think AUD should head off towards 8930. (There are some old highs between 1990-97 that could cause some hesitate en-route) regards - arco
Regarding gold - the news is always a laugh. Hot and fast growing economies? Gold rises because the economy is growing so fast, people want to buy the metal for uses. Same with silver, copper, etc. Slowing economy? Gold rises as a safe haven and increases in value because worries of a slowing economy will erode the value of the dollar. So essentially, according to the media, gold goes up no matter what.
I agree with you. The classic driver for gold is inflation -- actual, risk of, and/or fear of. That calls into question the reasons de jour the media gives (which you cite).
And the belief as of late is that inflation is moderating and does not seem a risk (or as great a risk) as the past. This should - if what you say is correct (I agree, incidently) - moderate gold's price. But it hasn't as of yet. So either the gold people haven't quite caught on to the fact that inflation is moderating OR it is no longer the important factor for gold's price.
My AUS shorts, 4 sold one week ago at .7912 avg., had bouts of nice equity this week, but last night's surprise high for Aussie employment hurt quite a bit. Plus, gold has backed up some since I started the trade, but without much negative effect on AUS, contrary to my premise. For above reasons, I'll exit the shorts tonight or early am (Friday session) ahead of USA payrolls. Position is a little above water still, so I'll close it overnight or Europe at the best I can get. I won't wait for it to go much underwater (above .7913).