In the last positioning report given by the CFTC, longs in Gold pared positions by a scant 18,477 contracts last week. This leaves the market still somewhat overbought with non commercial and non reportables long 329,268 contracts entering this week. This obviously speaks to the lack of abandonment concerning the global economy on the safe haven trade. The Gold market has retreated somewhat since the post Brexit highs in the face of a rising Dollar along with U.S. equities trading up to all time highs. In front of the Gold market is a two day meeting of the FOMC next week and then August option expiration on (7.26) and first notice day for August futures on (7.29). Bulls will argue that the potential seasonal buying pattern for metals begins in earnest late July through August. It is my contention that if the market is going to break with more liquidation from longs going forward near term, it could happen in front of or immediately following the two day Fed meeting next week. Also liquidation could be seen before month end with options and first notice day for the August contract. A fifty percent retracement comes in at 1295.0 basis December futures from the June low to the recent July highs. Corrections in the market sometimes target these aforementioned retracement levels.
Therefore I propose using weekly options for a potential price break which calls for buying a week 5 July Gold 1300 put for 3 points, or in cash value $300.00. The risk on the trade is the price paid for the option plus all commissions and fees. Expiration for this option is the last day of July 29th, which is month end.
For those interested I hold a weekly grain webinar each Thursday at 3pm. It is free for anyone who wants to sign up and link for sign up is below. If you cannot attend live a recording will be sent to your email upon signup.
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.
