After an election night rally that sent Gold almost five percent higher, Gold has succumbed to a free fall losing nine percent in less than a week from the election results. Declining open interest over the last six sessions may point to margin liquidation as well as stop loss orders being executed. Looking at the 12 month high at 1384 in July (2016) to last Decembers low at 1052, brings the fifty percent retracement level to 1218 basis December futures. Although the market traded below this level on (11/14), we settled above 1218.0 so far this week. Despite a surging greenback, I believe the uncertainties of a new administration on top of continued global headwinds may offer some further buying opportunities in the precious metal sector. There has been some technical damage to the charts with the aforementioned fifty percent retracement level needing to hold near term. The impending rate hike in December has been for the most part priced in by traders although we should see heightened volatility into the final Fed meeting of the year. Those looking at Gold for an investment opportunity need to be looking long term as near term headlines will whip saw short term futures and option players.
Therefore consider these two trades that you can sit with for a while in the precious metals. For Gold look at August 2017 options. I propose buying the August 1350 call and selling 2 August gold 1450 calls for even money plus all commissions and fees. In Silver consider buying the July 2017 silver 20.00 call while selling 2 July Silver 22.50 calls for 3 points or $150.00 plus commissions and fees.
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.
