Gold’s retreat from last week’s highs comes on two fronts. First longs liquidating their massive position paring back positions ahead of the FOMC next week. Non commercial and non reportable positions increased their long positions in the market up to 352,536 contracts and increase of over 34K contracts following the disappointing non-farm payroll report last week. However longs began taking profits late last week and the pressure to the downside has continued to begin this week. It’s important to note that many longs have the profit and therefore the risk heading into an uncertain FOMC.

Second, outside markets most notably the indices have been under duress in the last few sessions suffering major losses. The retreat in the bond market has been noted as well, while the Dollar has regained a slight bid from the early September lows. Normally in these type conditions the Gold market would experience more of a risk off bounce, but that hasn’t been the case as long liquidation remains the theme. I expect more of the same into the FOMC next week, the market is absent of any major economic release aside from retail sales on Thursday.

Heading into the two day FOMC report next week I would consider the following strangle as a strategy into the report. For upside exposure look at buying the October 1350-1380 calls spread. For downside exposure consider buying the October 1280 put and selling the December 1250 put. You can package both vertical option spreads for 5 points, which in cash value costs $500.00 plus all commissions and fees. October options expire on September 27th, leaving this a report day volatility play.

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.

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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.