Gold continued its strong performance so far for 2017, hitting a two month high on Tuesday rallying on two fronts. First, news out of Britain on commentary from the British prime minister saying that the U.K. ostensibly wants out of the European Union. The news seemed to rekindle fears of a hard British exit from the Euro zone.
Second, comments from President elect Trump over the weekend, citing that the Dollar was too high in regard to fair trade practices for U.S. goods and services, sent the greenback spiraling lower. As we inch closer to the inauguration, it seems the path of least resistance in Gold remains upward given the uncertainties of a new administration in Washington. Gold has rallied over $64.00 since the start of the year and just over $90.00 since last December’s lows. The Commitment of Traders report still shows the net long in gold at 123K contracts. While this is still a decent size net long in the market, it is nowhere near the late summer net long of 372K contracts. Clearly there’s room for funds to increase their long position in the market if uncertainty looms ahead on the global economy. Gold will need such an environment for this rally to continue as I believe it will trade inverse of stocks and the Dollar in the near term and of course through the inauguration. An aggressive trade in the very near term would either to buy futures at 12.11 basis February futures with 1226 objective. Or to buy the February 1230 call and sell 2 of the February gold 1190 puts for even money.
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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.