The path of least resistance has been higher in both Gold and Silver since the disappointing jobs number release June 3rd. Increased concerns have spilled over to the Precious metals sector over the upcoming referendum in Britain whether it will stay part of the European Union. Market sentiment in anticipation of this week’s FOMC meeting is pointing to no chance of a rate hike in either June or July as the 2 and 5 year notes have been bid up with vigor hinting to market participants that a chance of a rate hike this summer is fleeting. Last week’s COT report showed non reportable and non-commercial traders holding a long position of 265,764 contracts while for Silver Non commercial traders came in long 74K contracts. The world’s largest gold ETF saw their holdings rise last week by 6.54 tonnes to the highest level since October 2013. The weak May jobs date provided the rally and a surge in longs returning in the market. The Brexit has offered greater uncertainty on what a British exit may mean longer term furthering the precious metal cause. All signs are pointing to new yearly highs on the charts.

For those looking for bullish exposure may consider the following trade. Look to buy the August Gold 1300 call while selling 2 August Gold 1350 calls for $1.00. In cash value, the trade costs $100.00 plus all commissions and fees. The risks here besides the costs of the trade is that you are short one extra 1350 call basis August options. Those options expire in late July and should the underlying futures settle above 1350 at option expiration, one would be short a futures contract at 1350.0 basis August futures.  

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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.