Market Overview

Physical Gold Investor's May Want to Hedge Against Downside Risk

Physical Gold Investor's May Want to Hedge Against Downside Risk


Todays close in Gold (GCM3) key-Gold nearly reached our second target of 1474-78.2 yesterday as it closed up more than $30. Last night's action maintained this momentum reaching a high of 1484.8 before retreating back guessed it a 1458 low; originally the first major resistance target. 1458 presented a solid buying opportunity in a fast paced market early this session. Currently the market is trading around the 1466 pivot level. Just as we anticipated and you read all week, option expiration brought significant buying into the market as traders had to exit puts. The capitulation last night on the 1484.8 high and the fact that it is trading $20 lower is likely signaling that this market will go into a consolidation mode and range trade. The market only spent a small amount of time above the 1474-78.2 major resistance target; we will continue to use that as the topside of the range with 1487.5 being an extreme upside if stops are hit above this level. On the downside, 1455-58.8 has already proved to be support, however, we believe passed today that the range can extend as low as 1437-38.5 as the bottom side of the range. To recap as we expect this market to consolidate over the next couple trading sessions, 1437 to 1487.5 is the expected defined range. Look to use the levels within this range to trade on the first test, with 1455-58.8 being intraday support today.Bottom line if you are Holding a physical Gold you may want to consider some downside protection. How about buying the AUG GC 1320 puts. Each contract covers 100 ounces. In this case the option is around $1600 each. The idea is if Gold breaks $1320 per once you are covered. The contract covers you for around 90 -days. Institutional investor's/ traders' have used this type of strategy to cover risk's since the invention of options. Food for thought, Good luck and Good trading.

Pivot - a close above or below 1466.1 will be critical
Resistance -1474-78.2***, 1487.5***, 1499.2*, 1505.5***, 1520-25**
Support - 1455.8-1458.5***, 1447.2*, 1437.5-38.8**, 1424-28**, 1411.5, 1402-04.2***


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Posted-In: Technicals Commodities Markets Trading Ideas


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