December gold settles 1112.7, up $18.60 for the week ended August 10th through August 14th.
Gold futures ended lower for a second straight session on Friday, as the dollar strengthened against a basket of major currencies, following mixed economic data from the U.S. highlighted by industrial production rising more than expected in July. Gold has been trending higher after investors weighed the impact of China's surprise move to devalue its currency. The yuan has lost nearly 3-percent since the devaluation earlier this week. Gold for December delivery, the most actively traded contract, shed $2.90 or 0.3 percent, to settle at $1,112.70 an ounce, on Friday. Gold for December delivery scaled an intraday high of $1,120.40 and a low of $1,111.10 an ounce.
Despite the day's turn lower, gold bullion was set to end a seven-week losing streak after China's yuan devaluation increased uncertainty over the global economy and pushed investors into assets perceived as safer, such as gold. Volatile markets were soothed as the yuan steadied after China's central bank said there was no reason for the currency to fall further given the country's strong economic fundamentals.
The precious metal has gained nearly 2-percent in the week so far, after a seven-week slide that was its longest retreat since 1999. China's gold reserves rose to 53.93 million ounces by the end of July, up from 53.32 million at the end of June, the central bank said. The data was released following a June adjustment that was the first in more than six years. China's gold demand this year is expected to at least hold steady with last year at just under 1,000 tonnes, the World Gold Council said.
December gold futures registered a bullish breakout on Monday’s session with a close above 1100.0 an ounce on Monday August 10th. Bullish forces could be aligning as the Gold market has rallied steadily since the release of the July unemployment report. There have been some modest signs of Indian and Chinese bargain buying interest following this week’s Chinese currency devaluation with talk of possible further currency devaluations ahead. Market perception that this could be the beginning of a currency war is yet to be seen but the uncertainty over what’s next is significant. I believe that this is what gold bulls were hoping for, a major policy shift by the world’s second largest economy.
To take advantage of a potential move to the upside I propose the following trade: I would look at buying one December gold 1200 call while selling two December gold 1250 calls for a purchase price of 1 point or in cash value $100.00. The risk on this trade are the price paid for the options plus all commissions and fees.
