Morning Gold Fix – March 7, 2011
FMX | Connect – www.fmxconnect.com - (Reported 3/7/2011)
The following is a summary of yesterday’s US gold activity and a recap of Asia & European markets overnight. It includes our proprietary options analytics and news stories from industry professionals.
Summary
April Gold settled at $1428.60 per troy ounce on Friday, a gain of $12.20 for the day. Volatility and skew reversed some of the previous day’s losses in a relatively lackluster session, despite strong futures movement.
Market Commentary
June is now the focal point for changes in volatility higher. Although it leads the pack as an early indicator in volatility it underperforms relative to August through February. June is definitely the retail speculators’ darling but dealers have no problem selling it when they have order flow to lay off against it. The same can not be said for August through February. Order flow is big from the dealing banks when it comes in, but it is not consistent. Options market makers mark up December options way more than somebody would expect given a specific move in June vol; and they do it without a single order coming in to justify it. There still is a lot of anxiety from the December 2000 C shorts. The correlation of gamma between the front-month and back months is very steep. While we we would like to tell speculators to sell the back month and buy the front month because of the $6 break-even contango but we will refrain without knowing their stomach for margin calls.
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Technical Overview
APR GOLD
Overall the market is bullish with last week’s rallies triggering a preliminary breakout over previous highs. A surge back over 1441 should boost rallies into an aggressive bull drive to reach for 1450 and 1490. Additional corrective trade should work into flagging congestion, but try to hold 140990*. A close under 140990* or drop under 1400 confirms the failed breakout and calls for a retracement to 138790*.
MAY SILVER
The market is bullish, alerting for an aggressive bull phase. Trade is poised for a bull extension to 3590-3600 as well as chances for a larger blow off towards 3800. A close over 3610 could spark rallies. If trade slips under 3397, be alert for a flip into a flagging corrective days, but a close under 33175* for a peaking turn into sustained retracements to test 3192* for a larger top.
MAY COPPER
The market is returning to the prevailing bull trend and a thrust over Friday’s high could boost secondary rallies to 460+ and challenge the recent swing high. Any corrections should hold over 44540+ to keep bull forces. A roll off through 44540 cautions for a near term negative turn that will lead to choppy defensive trade back along 440-43620*. A close under 43620* is bearish.
In the News
Bloomberg (Reported 3/7/2011)
Gold climbed to a record in London and New York as escalating violence in Libya and concern inflation will accelerate boosted demand for the metal as an alternative asset. Silver rose to a 31-year high. Clashes during the past two days have become more deadly as Libyan rebels moved along the coast toward Tripoli and government troops loyal toMuammar Qaddafi escalated their use of force. Concern oil supply disruptions may spread through the Middle East pushed the fuel to a 29-month high in New York. Gold typically moves inversely to the dollar, which fell to a four- month low against six other major currencies. Gold Advances to a Record on Libyan Unrest; Silver Reaches a 31-Year High
Reuters (Reported 3/7/2011)
Gold climbed to a record high above $1,440 an ounce on Monday as the threat of violence spreading in the Middle East and North Africa pushed oil prices to 2-1/2 year highs and burnished the metal's safe-haven appeal. Spot gold hit a high of $1,442.70 an ounce and was bid at $1,441.55 at 1127 GMT, against $1,431.95 late in New York on Friday. Gold fixed at $1,437 at 1030 GMT. Gold climbs to record as Mideast violence flares
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