Morning Gold Fix – June 4, 2010

FMX | Connect – www.fmxconnect.com - (Reported 6/04/2010)

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

Gold was weaker yesterday, as markets favored equities over safe havens (with BP as a notable exception).

The market opened down around $5.00 yesterday and traded sideways for most of the morning. Then around 11:00 AM EDT, a quick selloff occurred taking the August contract from a high during that period of 1219.60 to a low of 1202.40. The selling stopped and futures stabilized in the1208 area, but we feel the damage was done. Hot money and speculative longs are losing patience or new shorts are punting in expectations of bearish info this morning. With the employment numbers due out at 8:30, Nervous Nellies will square books everywhere. We might add that this is about the time that the stock market began in its own sell-off. Gold and equities are moving in lockstep approaching the NFP.

The NFP number is expected in the +600k range from Goldman Sachs along with a downtick in the unemployment number to 9.7%. European and Asian markets were relatively calm; they are also waitinging for more signs that the great buyer of stuff, the U.S. consumer, will have a job to get more blenders, Ipods and other modern conveniences.

Last night Gold’s weakness continued as it took out the lows established during U.S. hours yesterday. It touched a low of 1198.50 on Globex. The likelihood of further IMF sales are also overhanging the market as the head of the IMF policy steering committee stated that in light of loan potential to Europe, “the IMF is not properly funded and members were talking of doubling the SDR levels.” Governments tend to buy the highs and sell the lows. If this is true, expect a big sell off as the market punishes the IMF for telegraphing its interests.

August gold was down 3.5 to $1206.5 per 100 troy ounces as of 8:00 AM EDT, this morning. The June U.S. dollar index was up .561 to 87.78. July platinum was down 12.9 to $1530 per 50 troy ounces. July Silver was down 12.1 cents to 17.81.

-Elizabeth Thawne

For Market Prices Click Here

Previous Session Options Commentary

Today’s gold options activity was uneventful. Volatility started the day soft, but firmed up in the short dated months during the late day selloff. Option values decreased across the board. It’s important to know that breakeven for volatility is approximately $18. Even on days that gold gaps higher, it still fails reach getting breakeven. Thus, option behavior is consistent with information the market is giving. In trading,  August straddles were priced while December 2011 straddles traded dealer to dealer. Speculative funds were invisible.

End of Day Options Report Here

Closing Straddles

FMX Morning Newswire

Bloomberg (Reported 6/04/2010)

“Gold declined for a third day in London as some investors sold the metal to lock in gains after a rally.

Gold is heading for a weekly loss of 1.3 percent, after climbing to a two-week high this week on increased investor demand for an alternative to the euro. The single European currency was steady against dollar today after sliding to the lowest level in four years on June 1.” Gold Declines in London as Some Investors Sell Following Rally

NS Futures (Reported 6/04/2010)

“The initial tilt in gold prices this morning is to the downside, as the gold trade is seemingly concerned about a further tamping down of flight to quality fears in the lead up to the US Non Farm payroll release. Expectations for the US May payroll gain are really robust, with one firm predicting a gain of 750,000 jobs and that is a big enough number to shuffle the Euro zone debt crisis to a temporary back burner status.

While equity markets in Asia were lower, European indices moved higher and that has led to the US markets showing a slight gain heading into the opening. The Dollar has lost some of its value overnight, but retains a slight gain versus the Yen.” Daily Metals Commentary 

Reuters (Reported 6/04/2010)

“Gold fell below $1,200 an ounce in Europe on Friday as traders took to the sidelines ahead of hotly-anticipated U.S. non-farm payrolls data due later in the day, with a strong reading expected to boost risk appetite.

The metal has benefited this year from nervousness in the financial markets, which has knocked assets seen as higher risk, such as stocks, industrial commodities and the euro.” Gold falls below $1,200/oz ahead of jobs data

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