Morning Gold Fix – July 12, 2011

FMX | Connect – www.fmxconnect.com - (Reported 7/12/2011)

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 $1549.20 per troy ounce on Monday, a gain of $7.60 for the day.

August gold was down $1.5 to $1547.7 per 100 troy ounces as of 8:00 am EST this morning. The Sept U.S. dollar index was up 0.176 to $76.550. October platinum was down $7.5 to $1720.8 per 50 troy ounces. Sep silver was down 54.8 cents to 35.150.

Market Recap

Monday marked the 5th straight day of Gold’s unabashed rally, with August futures pushing up as high $1,557.60 per ounce and trading strong into the afternoon session. Today’s gains were propelled by fresh debt concerns out of Europe (specifically, Italy),  and a continuing standoff over the U.S. debt ceiling.

Volatility was firm from the open without a lot of featured trades. Options were priced higher in the rally, but most speculation by bulls was on the put side. February, October and December puts were sold. One bear speculator bought the December 1475 put. It wasn’t until futures broke 1550 (once again) that the call side caught real interest. Risk reversals, call spreads and outright calls were quoted and bought by dealers, speculators and market makers looking for a port in the storm. Volatility spiked before President Obama began his press conference at approximately 11 am. No new information really surfaced during while we was speaking and after he finished speaking volatility softened and futures sold off slightly.

Volatility was very strong on the day with the term structure taking its cue from August. August would rally, and October on back would follow suit. This process repeated several times during the day. This we are happy to saw is more “normal,” whereas in the past, volatility would rally first in the backs. We still think is ridiculous to have a breakeven curve with a $5 contango, but who we are we to fight it. Volatility and wings both finished higher on the day, a rare occurrence. This is testament to the intense uncertainty of the market and the perception that we could see a several-standard deviation move in bullion.

We think it’s interested that gold was so strong considering silver’s lack of participation in today’s rally. It’s convenient to say this, but we’re going to say it anyway: gold is money and silver is not. Silver is an industrial metal with precious qualities. Believe us, Europeans are not buying bars of silvers because their economy is going to hell in a handbasket; they are buying gold. While we think silver will catch up to gold is in a sustained rally we think staying long gold is still the way to go in the current environment.

Market Prices

In the News

Bloomberg (Reported 7/12/2011)

Gold fell for the first time in seven days in London as growing concern that Europe’s debt crisis is worsening strengthened the dollar, curbing demand for the metal as an alternative investment. Bullion advanced to all- time highs in euros and pounds. The dollar rose to a four-month high versus the euro after a meeting of European Union finance ministers failed to defuse the region’s escalating debt crisis. Gold, which typically moves counter to the greenback, yesterday climbed to the highest level in more than two weeks to trade 1.3 percent from its record. Gold Declines for First Day in Seven as Europe’s Debt Crisis Lifts Dollar


Reuters (Reported 7/12/2011)

Gold priced in euros hit record highs for a second day on Tuesday as fears Europe's debt crisis could spread persisted despite European Union officials' pledges to help heavily indebted euro zone members. The strength of the dollar .DXY, which rose to four-month highs, suppressed the price of gold in the U.S. currency, while bullion priced in high-yielding currencies rallied. Gold in euros hits record as debt worries deepen


Kitco News (Reported 7/12/2011)

Comex gold and silver futures prices are trading weaker Tuesday morning and are feeling the pressure of a general commodity market sell off amid a European Union sovereign debt crisis that has escalated this week. The stronger U.S. dollar index is also a bearish factor for the precious metals this week. Comex Gold, Silver Pressured by General Commodity Market Weakness as EU Debt Crisis Intensifies

Technical Overview (GRI)

AUG GOLD

1* Historical analysis of this minor swing pattern shows a definite bullish bias for today's action, with the odds of this market taking out yesterday's high in the next two trading sessions around 71 percent. 2* Market is challenging a previous daily swing high and may attempt a breakout. Closing beyond 1559.30 calls for continuation rallies. A failure around 1559.30 cautions for a reactionary setback. 3* We have currently achieved the initial swing objective of 1551.30, and could penetrate the top end of the target zone (1559.30) shortly. A close under 1508.59 is needed to negate a bull trading stance. 4* Market is within proximity of this week's projected support range of 1524.36-1549.20, which may provide a likely zone for bottoming action or rebounds.

SEP SILVER

1* Market showing a preliminary breakout over a previous daily swing high and needs to quickly extend rallies into a close beyond 3678.50. Failure to extend the breakout today-tomorrow alerts for a bull failure. A close under 3561.76 helps confirm a breakout failure. 2* Despite yesterday's bearish performance, historical analysis of this minor swing pattern shows a definite bullish bias for today's action, with the odds of this market taking out yesterday's high in the next two trading sessions around 71 percent. 3* Note that yesterday's outside bear day favors declines into the next 1-3 days. Corrections inside the outside range should stay under 3640.83 to promote follow-through action. A reluctance to trade under 3554.00 or a close over 3640.83 by the second day increases the chance for full reversal of the outside day. 4* Market is within proximity of this week's projected support range of 3281.92-3569.80, which may provide a likely zone for bottoming action or rebounds. 5* Yesterday's penetration of support range levels gives a statistical bias for declines today-tomorrow.

SEP COPPER

1* The upside target zone for this pattern is from 448.95 to 457.90 with a close under 434.65 needed to negate a bull trading stance. 2* Market is within proximity of this week's projected support range of 423.23-434.80, which may provide a likely zone for bottoming action or rebounds. 3* Yesterday's penetration of support range levels gives a statistical bias for declines today-tomorrow.

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