Friday, July 1, 2016

Gold rises over $20 as the second half of 2016 begins just like the start of the year

As the second half of 2016 began today on July 1, gold moved up and continued the trend set back in early January of this year.  In fact, with the gold price closing up over $20 to end the week at $1342.90, it solidified the bull trend upward and closed out above four year old resistance levels.

Live New York Gold Chart [Kitco Inc.]
Gold futures continue to see more inflows as we start the second half of the year. Both technical buyers and hedge funds put new money to work in a busy pre-July 4 Friday.
We had been worried about about a rally in gold futures causing a rush for a wing vol, a way out of a call with high volatility. The upward spike in gold futures prices on Friday (to a high of $1,344.30 for the August contract traded at the Comex) kept implied volatility of options muted as some market participants sold call options against the underlying length. That meant that traders sold calls against futures that they already purchased 
Futures contract trading volume on the Comex on Friday was equivalent to 20 million ounces, and volume in front month call options are picking up. 
The GCQ $1360 calls have been the main option interest with close to 2,000 contracts being bought and sold down .5% vol. - The Street
In addition to gold spiking higher, the one asset class that did much better was its brother metal, silver.  In fact, just as gold spiked by more than $100 on Brexit day last week, silver rose by nearly $2 over the past two days as expectations of central bank money printing and historic short covering rocketed the white metal to nearly over $20 an ounce.

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