28
Jul
2008

Gold Investments Market Update – Option Markets Point to $1,200 Gold in the Coming Months

Gold

Gold finished trading in New York on Friday at $928.40, up $6.00 and silver was up 12 cents to $17.34. Both gold and silver experienced further falls last week on falling oil and commodity prices and tentatively stronger dollar and equity markets.

Gold was up early in European trading but has succumbed to selling pressure on further falls in the oil price despite the dollar weakening this morning.

Option Markets Point to $1,200 Gold in the Coming Months

Reuters carries a very interesting article today in which the large amount of call option positions for gold at far higher prices in the coming months and particularly at the $1,200 per ounce level was looked at.
(Gold Options Point to $1,200 – http://www.reuters.com/article/hotStocksNews/idUSN2535920220080725)

The options markets are known to be the preserve of sophisticated and smarter money and this in conjunction with the strong seasonal pattern of July/August lows followed by strong rallies in the early Autumn is another indication that we may have or will in the coming days experience another short term low in gold’s secular bull market.

$1,200 per ounce remains a distinct possibility by year end.

Especially as none of the fundamental factors that have driven the gold and silver markets have disappeared. The continuing mantra that the ‘commodity bubble has burst’ will likely again be seen as wishful thinking. As barring a significant global depression it is unlikely that the real supply/demand issues seen in the commodity and precious metal markets in recent months will be ameliorated – unless there is sustained period of higher prices.

Today’s Data and Influences

There is no data of note in the U.S. today.

Analysts are looking to two key U.S. economic reports later this week, including the monthly payrolls data on Friday, to see whether the dollar can build on its recovery from a record low struck against the euro earlier the month. “The dollar’s recent fortunes have been dependent to a large degree on economic indicators, and a weak reading in U.S. payrolls could turn the tide against the dollar again” one market analyst noted. The payrolls report is expected to show a loss of 75,000 jobs in July, in what would be the seventh straight month of a decrease. Before the U.S. jobs figures, second quarter U.S. GDP will be released on Thursday that may also test the dollar’s resilience and support gold.

Gold and Silver

Gold is trading at $929.20/929.80 per ounce (1330 GMT).
Silver is trading at $17.32/17.37 per ounce (1330 GMT).

PGMs

Platinum is trading at $1730/1740 per ounce (1330 GMT).
Palladium is trading at $389/395 per ounce (1330 GMT).

Mark O'Byrne
Executive Director