Gold Trading 101: Making Sense of the Market

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March 10 (Bloomberg) -- Bloomberg's Scarlet Fu, Bloomberg Industries’ Kenneth Hoffman, and Larry Shover of SFG Alternatives put futures in focus with a look at gold in "On The Markets" on Bloomberg Television's "In The Loop."

Gold falling so much last year.

It fell 28% and recovered in 2014. how do you read the move?

Is it a correction to what we have seen on friday?

It seems as if the ukrainian crisis boosted gold a week or so ago.

The current consensus is it called down for the time being.

Gold pullback a little bit.

You continue to have gold in this $1400 range for almost six or seven months.

Everybody is trying to figure out if the bears are going to talk about taper and the bulls will talk about asian demand.

Larry, let us bring you in.

You are not impressed with the gold rally.

What is your trade?

Right now, i would be short futures.

I would pick a spot at 1338. i would look for a hard by back around 1280. i think ken brought up some good points.

People were trapped in this volatile trading range.

On the upside, i would be stocked out really hard at 1360. i am willing to lose $220 to make $580 in the short term.

This is while we are trapped in this volatile tro it -- trading range.

For those who do not know how futures work, the price of gold is quoted in dollars.

The futures are in dollars per ounce.

You have to buy it back.

That is a profit.

Since the entire contract is for 100 ounces, you would make $5,200 for every contract you but at this level.

There is a lot of lingo.

One key thing that you should know is six -- ticks.

That is the minimum amount that the gold can move.

It is about $.10 per ounce.

You then need to take into account the 100 ounces.

And terms of a minimum move, it is $10 per ounce.

That gets you to the $10 per contract minimum move.

Are you factoring and the data coming out of china?

These are the unexpected lunches in exports?

China gold stocks are very high.

We saw friendly by in april through june last year.

If the stocks are as high as they are, i cannot see it repeating.

The normalization of monetary policy is not going to shake at any time soon.

Thank you so much.

Can hoffman at princeton university.

Think of her join us.

We are on the markets once again in 30 minutes.

"market makers" is up next.


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