Gold quickly gave back all of its recent gains following last Friday’s jobs report already this week, posting lows at the 1260 level basis June futures. After the official non-farm payrolls report said the US economy added the fewest jobs in seven months in April, weak international trade data from China this week saw the Dollar rebound to the highest levels in almost 2 weeks on its trade-weighted index against other major currencies. China’s exports shrank almost two percent last month from a year earlier, while imports sank by 10 percent. Shanghai’s stock market fell sharply to an 8-week low on the news, while Western equities cut earlier gains as crude oil also retreated after rallying amid the wildfires in Alberta Canada that shut half of the country’s oil output over the weekend. Latest positioning data from the CFTC say that hedge funds and other money managers grew their net speculative betting on higher gold prices to the largest size since October 2012.
While longer term sentiment and interest should buoy Gold over the long term, the net long should warrant caution in the interim. Gold has turned around since Friday’s weak employment data and the rise in equities this week should offer a risk on sentiment by investors into equities. Regardless of further selling pressures, I would consider buying puts in the near term and calls in the long term. Although this may seem aggressive, consider the following trades. For near term downside exposure using June Gold options which expire May 25, consider selling the June Gold 1320 call while buying the 1230 put for even money. For long term exposure, consider buying the Dec Gold 1500.00 call while selling 2 Dec Gold 1060 puts for even money as well.
For those interested in grains, Walsh Trading’s Senior Grain analyst Tim Hannagan hosts a free grain webinar each Thursday at 3:00 PM central time. Tim has been ranked the #1 grain analyst in the United States per Reuters and Bloomberg for his most accurate price predictions for soybeans and corn in the years 2011 and 2012. Link for next week’s webinar is below. If you cannot attend live, a recording will be sent to your email upon signup. Or please contact me at slusk@walshtrading.com
RISK DISCLOSURE: THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING. THIS REPORT IS A SOLICITATION FOR ENTERING A DERIVATIVES TRANSACTION AND ALL TRANSACTIONS INCLUDE A SUBSTANTIAL RISK OF LOSS. THE USE OF A STOP-LOSS ORDER MAY NOT NECESSARILY LIMIT YOUR LOSS TO THE INTENDED AMOUNT. WHILE CURRENT EVENTS, MARKET ANNOUNCEMENTS AND SEASONAL FACTORS ARE TYPICALLY BUILT INTO FUTURES PRICES, A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES AND OPTIONS CONTRACTS.
