Gold’s recent push higher near 1300.0 an ounce and a four week high comes on two fronts. First, recent economic data out of China, the world’s number producer and number two consumer provided upbeat sentiment in the precious metal sector. China’ latest PMI bested expectations coming in at 51.2 versus 50.4 in September while factory orders were the highest in two years. Second the recent announcement late last week from the FBI regarding the Clinton emails has provided some market uncertainty about the impending presidential election regarding a potential Trump
Presidency. Polls have narrowed in key swing states while trend and index following funds have rushed back into metals amid the confusion.
Technically the market has broken $105.00 from the September 22nd high at 1347.8 to the October 7th low at 1243.2. A fifty percent retracement sits at 1296.0 The 50 day moving average sits at 1301.9 while the 100 day sits at 1316.8. We are seeing some moving average crosses back to the upside indicating bullish momentum. Funds have pared their long positions from a summer high of 357K to 236K last week. Although the Fed meets this week, the odds of any rate increase are nil. Those looking for some upside exposure with just a few weeks before expiration using December 2016 options may consider the following trade.Consider buying the December gold 1320 call and selling 2 1360 calls for one point, or in cash value $100.00 plus commissions and fees. Those looking for downside exposure should consider the following. Look to buy the December Gold 1250 put while selling 2 Dec Gold 1220 puts for two points or $200.00 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.
