Morning Gold Fix – June 6, 2011
FMX | Connect – www.fmxconnect.com - (Reported 6/6/2011)
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
August Gold settled at $1542.20 per troy ounce on Friday, a gain of $9.70 for the day. Gold rallied after weaker-than-expected nonfarm payrolls, and options remained firm.
August gold was up $3.6 to $1546.0 per 100 troy ounces as of 8:30 am EST this morning. The June U.S. dollar index was up 0.103 to $73.910. Jul platinum was down $1.8 to $1821.9 per 50 troy ounces. Jul silver was up 59.9 cents to 36.790.
Options Commentary
Yesterday’s selloff in gold seemed to have been on the back of a temporary resolution to the Greece crisis. That trend seemed to continue throughout the evening and into the morning before the Comex open, as gold traded $2-7 lower overnight. At 8:30 ET nonfarm payrolls came out at 54,000, well below the consensus expectation of 165,000 and gold immediately began to rise. Volatility was offered as the market broke above unchanged and remained offered until August traded above 1535, at which point large July put buying began to come in (focused on the 1500-1460 area). At the same time, a momentum fund came in and purchased the October 1600/1690 1x2 Call spread. The activity was a little confusing from a directional perspective but could easily be explained from a bullish or bearish perspective.
Bullish: The put buyer(s) showed his hand in volume and price and waited for the market to come to him. He left his bids resting during the rally and waited until he was filled. These very well could have been futures bulls that were hedging their positions. The October 1x2 Call spread was simply that, a bullish purchase.
Bearish: The puts were bought by bears who thought we were near the top of the trading range and thought it was a good spot to get short. The 1x2 purchases is a momentum fund and seems to have a track record of buying near the top of a range.
Your guess is as good as ours for what today’s activity means directionally. From a volatility perspective, by the end of the day volatility was unchanged. It may have been weaker had their not been a buyer of the October 1470 put, propping the board up. Call skew underperformed a little. Put bids came in through the whole rally across the board.
Market Prices
In the News
Bloomberg (Reported 6/6/2011)
Stocks fell for a fourth day in Europe and oil declined on concern the global economic recovery is faltering. Portugal’s bonds rallied after the Social Democrats won elections pledging austerity measures. The Stoxx Europe 600 Index declined 0.5 percent at 7:25 a.m. in New York. Futures on the Standard & Poor’s 500 Index slipped 0.2 percent. Crude oil retreated before OPEC ministers meet this week in Vienna. The yen strengthened against all 16 of its major peers, adding 0.4 percent to 80.09 per dollar. The yield on Portugal’s 10-year bond decreased 10 basis points to 9.71 percent. Stocks, Oil Decline on Economic Growth Concerns; Portuguese Bonds Advance
Reuters (Reported 6/6/2011)
Gold rose for a second day on Monday, taking advantage of a weaker dollar after surprisingly weak employment data drove the U.S. currency to one-month lows and clouded the outlook for economic growth. U.S. employers hired the fewest number of workers in eight months in May and the unemployment rate rose to 9.1 percent, stoking worries economic growth may be faltering and supporting sentiment in gold, which is seen as a safe-haven investment during times of economic uncertainty. Gold rises as uncertainty grows over U.S. outlook
NSFutures (Reported 6/6/2011)
While the gold market could be tripped up by too much evidence of slowing in the US, the gold market initially has generally benefited from the recent revelations of slowing from the US. Clearly a weaker US Dollar has also provided the gold market with some lift, but comments from the former US Fed Chairman Greenspan late last week, might be lending support to gold and other safe haven instruments, as the past Fed head suggested he would agree to a roll back of the Bush tax cuts, in exchange for a shart reduction in spending, as he thinks the failure to cut spending could be a very big problem for the US. Daily Metals Commentary.
Technical Analysis (GRI)
AUG GOLD
The market is in a secondary bull upswing, but trade is against a previous 1550 downturn level. A close over 155450 is needed to spark rallies to a breakout attempt over the 157770 swing high. A struggle to push over 1550+ could trigger setbacks and may foster a slip to sideways or defensive congestion along 1525-1512. A close under 150270* is needed to signal a turn back to bearish trade.
JUL SILVER
The market is still in a short term upturn, holding potential for retracement rallies to 3900 and chance to spike over 4000+. However, the setbacks last week caution for near term corrective flagging days. Dips that hold and bounce off 3500+/- will allow bull forces to attempt another upswing. A close over 3770 is friendly. A close below 3480* marks a bear turn into a secondary downswing against the last swing lows under 3349-.
JUL COPPER
The market has been staging a short term recovery and a push over 420 may send retracements to 423-425. A close over 42725 is bullish. However, the setback from the 420 downturn level last week cautions for a shift to corrective congestion. Tight congestion off 40505* will bull flag. Closes under 40505* and 39905* signal a reversal into a secondary downswing to 395-.
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