The market came in lower yet May options were bid. At first we wrote this off to just too much premium being taken out last Friday but reassessed when June options caught a bid as well. Buyers came for calls in the 1500-1520 area for May and the 1500-1600 area in June. The market chopped around about $4 lower until the S&P announced it had changed its outlook on U.S. credit markets to negative. This is usually a precursor to a downgrade. Markets moved in tandem: gold higher, stocks lower, oil lower.

The complexion of the trading changed. Puts were sold naked June through December while call buying came in simultaneously for all these months. The prop desk of a European bank sold August 1400 puts at 14.5 against 1494 futures in August. Meanwhile over-the-counter banks were buying the 1350 P in December and financing it by selling the 1150 P/2000 C strangle. The tone was dynamic today with bulls selling puts unhedged and other bulls buying puts hedged. June was the strongest today on the call side but liquidity was there at every price if you needed it. May, on the other hand, was just bid.

Skew was performing for the calls and the change in volatility on higher moves is now consistent with that skew. Puts are beginning to be sold and it would seem we have ourselves a genuine old-fashioned gold call skew market for now. Future spreads were in again, in the rally.

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Technical Analysis (GRI)

JUN GOLD

The market is bullish, alerting for continued pressing rallies this week. Look for follow through rallies to attempt advances beyond 1500+. A close over 1500+ is bullish and could fuel a strong run to 1520-1530. Any corrective dips should find momentum forces injecting support at 147810*. A close under 147810* will trigger near term setbacks in the 1480-146630* range, but only a close under 145390* marks a topping turnover.

MAY SILVER

The market is bullish and signaling for rallies to 4380 as well as chances for a spike beyond 4500+. Any corrective dips should fight to hold over 4165 to stay bullish and bull flag. A close under 4165 alerts for a failing breakout, but a close under 41175* is needed to signals a reversal turn into a sustained correction and drop to challenge 3974* support for a larger top.

MAY COPPER

The market is in a short term downturn and targets a break against previous basing levels. Trade is positioned for follow through selloffs, although, be prepared for modest corrections if trade is reluctant to selloff under 416- and shift to sideways consolidation at 420-430. Only a close over 43950* signals a turn back to bullish trade. A close under 41370 should help drive declines below 40760-

In the News

Bloomberg (Reported 4/19/2011)

Gold was little changed in London trading, remaining close to $1,500 an ounce, after prices rose to a record yesterday for a third consecutive day. Bullion surged yesterday after Standard & Poor’s downgraded the U.S. credit outlook. The 14-day relative strength index, a gauge of whether a commodity is overbought or oversold, rose to 71.204, above the level of 70 that some analysts who study technical charts view as a sign that prices are poised to drop. Gold, Near $1,500 an Ounce, Trades Little Changed in London; Silver Slips


Reuters (Reported 4/19/2011)

Gold rose back toward the previous session's record high near $1,500 an ounce on Tuesday, with appetite for risk fragile after Standard & Poor's cut its U.S. outlook and as euro zone sovereign debt concerns simmered. Prices rose to a record $1,497.20 an ounce on Monday after the S&P announcement rocked the markets but slipped back quickly after running into strong resistance at higher levels. Gold rises towards $1,500, risk appetite fragile


NSFutures (Reported 4/19/2011)

The gold bulls have to feel confident with the number of serious financial concerns facing the world economy.  In addition to the question mark generated by the S&P credit rating standing of US debt, the gold market continues to mull the sovereign debt threat in the Euro zone, as the fear of slowing off debt issues at times has undermined gold prices.  While equity markets in Asia were generally lower during overnight trading, stock indices in Europe are generally higher this morning.  Early indications are for the US stock market to open today’s session near unchanged levels. Precious Metals Commentary.

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