The Gold market continues its upward surge reaching post-Brexit highs following the July 4th holiday. Long positions in Gold have pushed out to a whopping 354,072 contracts with speculators clearly piling on. The non commercial/non reportable position for Silver has reached 97,966 contracts long for Silver futures. . Based on CME’s Fed Watch Tool, futures markets are pricing in no chance of a rate hike this month, while only a 5.9% for both September and November Fed meetings, and a 17.8% chance in December. As a result Sharp gains in Treasuries this week already have resulted in all-time low yields again as the bond market along with Gold and Silver have been the safe havens of choice. Clearly the uncertainty of the Brexit, negative interest rates from major central banks around the world, and the uncertainties of the upcoming Presidential election have been a boon for Gold and Silver. Much of this rally comes in the face of a rising Dollar. Record long positions now could present some uneasiness into economic releases such as the June non-farm payroll number released July 8th; however I would use any dips as buying opportunities.
For those looking for a trade idea consider the following options position. I would look at buying the December 1500 call while selling 2 Dec Silver 1600 calls for 1 point or $100.00 in cash value plus all commissions and fees. The risk here is the costs of the trade plus all commissions and fees plus the fact you are short an extra call at 1600 call. Should the underlying futures settle above 1600 an ounce at option expiration, one would be short a futures contract at 1600 an ounce basis December.
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.
