June Gold settles 1290.5; up $60.50 for the week of April 29, 2016
Both the gold and silver markets continued their upward surge this week with both markets posting their best gains and new 2016 highs to end the week on Friday. The impressive range up action in my view has been the result of ongoing weakness in the dollar. It is also worth noting that there is growing concern that a soaring yen due to continued financial concerns is also pushing gold and silver higher. Weak economic data this week in the U.S. was highlighted by a very weak GDP reading. This news coupled with no meaningful stance on rates by the Federal Reserve this week ignited re-inflation signals that buried the dollar, and pushed both gold and silver to new highs. It is important to note that coming into the week, speculative and funds were long over 268K contracts. For silver, spec and fund longs came into the week long over 85K contracts. With a $60.00 rally in gold and a rally of over 90 cents this week in silver, it’s certain that the long position increased this week to levels not seen since 2011. Clearly we approaching over bought levels technically, but the fundamentals with underlying bullish themes haven’t spurred any profit taking yet. The recent rise in energy prices and commodities in general has only aided the precious metals advance.
The first week of any month brings new monthly job data, with the non-farm payroll being the highlight next Friday. Since the Fed is so heavily data dependent, the enormity of the jobs number in May and June could revive talk of another rate hike in June if the payroll number exceeded expectations. Given that I would look for some back and fill on the charts. Those looking for exposure in the gold market may consider the following trade. For upside exposure I would look at buying the Dec Gold 1400 call while selling 2 Dec Gold 15.40 calls. At the same time for downside exposure, I would consider buying the Dec 1200 Gold put, while selling 2 Dec Gold 11.30 puts. In cash value these option ratios can be packaged for $1.00 or in cash value $100.00, plus all commissions and fees.
Weekly Swing #s GCJ 16 for the week of May 2nd through May 6th
Resistance#2- 1341.3
Resistance#1- 1315.9
Pivot- 1273.6
Support#1- 1248.2
Support#2- 1205.9