Morning Gold Fix – June 2, 2010

FMX | Connect – www.fmxconnect.com - (Reported 6/02/2010)

The following is a summary of yesterday’s US gold activity and a recap of Asia & European markets overnight. It includes our proprietary options analytics and news stories from industry professionals.

Summary

The fundamental gold story has not changed. In fact, it has only exacerbated in the last 24 hours.

China is taking more aggressive steps to deflate what many are regarding as a real estate bubble. Meanwhile in Euro Land, reality is setting in. No credit, and no currency strength is putting a crimp in the consumer's ability to continue to buy Chinese goods. Low demand of finished product from China leads to less demand from China for raw commodities. We may now be in the middle of a large disinflationary commodity bear market, at least for industrial commodities. For Gold, not so much.

Futures came out strong yesterday in the face of a weaker Euro, Oil, and equities. This is to be expected and part of the pattern.  What was not expected was when the Euro popped at mid day. Equities proceeded to pare losses but mysteriously Gold remained firm. (PPT lacks multi-tasking skills?)

As a result, we are keeping two different headline templates next to our keyboards now.

1- Gold was higher today despite_______
2- Gold was higher today as______

We expect a battle with the mainstream media on copywrite usage of said phrases, but will take the risk for our readers.

Why will gold continue upward? Because we are buyers of it $300.00 lower, that's why. Not theoretical buyers mind you. Buyers for our P.A.s.  We fully expect to be unfilled. Our interest is exactly like a trapped short beneath the market. That said, if we go to market, you will be informed, as only then will Gold once again become a commodity and not a competing currency. Get short when we get filled!

August gold was down 5.1 to $1221.8 per 100 troy ounces as of 7:45 AM EDT, this morning. The June U.S. dollar index was up .295 to 87.020. July platinum was down 4.3 to $1545.1 per 50 troy ounces. July Silver was down 1.76 cents to 18.375.

-Elizabeth Thawne

For Market Prices Click Here

Previous Session Options Commentary

With the market unchanged, option volatility was offered heavily primarily in August where the 1250 straddle actively traded. Dealers were squaring up positions for the long holiday. The entire curve was soft through the day until the last hour when volatility firmed up as the market made new lows. Upon rallying with the news from Spain, volatility softened slightly. On the day, options were worth less than they were in the beginning.

End of Day Options Report Here

Closing Straddles

FMX Morning Newswire

Bloomberg (Reported 6/02/2010)

“Gold dropped for the first time in eight days in London as some investors sold the metal after its longest advance since December 2008 and as the euro’s decline against the dollar stalled.

The metal gained 4.1 percent in the seven days through yesterday, reaching a two-week high and trading within 1.7 percent of the record last month. The euro was little changed against the dollar after slipping yesterday to its weakest level in four years.” Gold Ends Longest Advance in 17 Months on Investor Sales, Euro

NS Futures (Reported 6/02/2010)

“Apparently the gold market wasn’t that interested in news that South African quarterly gold production declined on the prior quarter and also on the prior year’s quarterly output. Some might suggest that the gold market is accepting of a pattern of declining South African gold production, while others suggest that the focus of the trade is heavily skewed to the demand side of the equation.

Equity markets in Asia and Europe moved lower during overnight trading, but US equity indices are moderately higher as we approach the US opening. The Dollar has held onto gains against most of the major currencies, but has lost ground against the Pound.” Daily Metals Commentary 

Reuters (Reported 6/02/2010)

“Gold held above $1,220 an ounce in Europe on Wednesday, consolidating after the previous session's gains, with a rise in risk aversion underpinning demand for the metal as a haven from risk.

The dollar strengthened, equity markets slipped and oil prices declined as persistent fears the euro zone's debt crisis could jeopardize the wider economic recovery continued to pressure assets seen as higher risk.” Gold holds above $1,220/oz amid risk aversion

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