February gold settles 1075.7, down $8.40 for the week of December 7, 2015 through December 11th
Gold posted another losing week, running its streak to seven out of the last weeks for gold posting losses week on week, despite a slight uptick on Friday. This week’s loss comes ahead of the FOMC meeting next week on the 15th and 16th, with expectations of the first rate rise in seven years. Weakness in the energy sector, particularly crude oil, damaged gold’s fortunes this week, as fears of deflation were increased as oil prices fell to a seven year low on Friday. Option pricing in gold shows increased volume at the $1000.00 level in gold, a near term target for the bears. This is not surprising, as short positions in Comex gold futures and options are at record highs, while assets in the SPDR Gold Shares (N:GLD) are at seven year lows.
With a heavy short position in the market and a rate hike all but priced in, I would be protected on both sides of the market. Those looking longer term deep into 2016 can consider the following options trade. Using August 2016 options, look at buying the August 1200 call and selling 2 August 1280 calls, while at the same time buying the August gold 925 put and selling 2 August gold 850 puts. This options package should be purchased in my view for 3 points, or in cash value $300.00 plus all commissions and fees.
