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Gold Election


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The bombshell released from the FBI Director Sunday afternoon immediately offered a risk on vibe for investors as equity markets gapped open higher Sunday night to begin the week. The results for Gold have been disastrous as recent gains late last week have eroded. There was optimism among Gold bulls that a potential Trump victory might ignite safe haven buying into and through the election. As the election results tightened last week it led to talk of a post- Brexit like rally in metals. Conversely as of this writing it looks like just the opposite is occurring with a Clinton victory likely. Although most political pundits are calling for a very close race, a Clinton victory has led to talk of Gold falling back to the early October lows down just below 1245.0 basis December futures.

Aside from the election there have been other important headlines released this week concerning Gold. News from the World Gold Council pegged 3rd quarter gold demand to have declined by 10 percent with consumer demand falling 16 percent. This bearish news was offset by news detailing ETF demand reaching its highest level since April 2013. ETF demand was strengthened from the European Union as investors sought Gold in response to continued zero to negative interest rates. Both bits of news that normally would have caused increased volatility on each headline were largely ignored due to the election

With exit polling coming in showing a Clinton victory more probable, the path to least resistance for Gold looks lower. As of this post the Gold market is trading near 1276 December futures. Downside exposure for an election day trade would call for buying 1 December 1250 Gold put for $5.80 or 580.00 dollars plus commissions and fees. This option is only $25.00 out of the money with option expirary on November 22nd. Similarly a 1300 December gold call which sits $25.00 above the underlying futures price is carrying twice the premium of the put. This tells me the market is heavily weighted to the upside still as non commercial non reportable funds came into this week long 247K contracts. If by chance Trump can secure the Presidency, look for a safe haven rally of biblical proportions potentially sending Gold up to $1350.0 an ounce. . Use weekly options for any upside exposure. I propose then buying a week 2 November 1330 gold call for 3 points or $300.00 plus commissions and fees.

For those interested I hold a weekly grain webinar each Thursday at 3pm. It is free for anyone who wants to sign up and link for sign up is below. If you cannot attend live a recording will be sent to your email upon signup.

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RISK DISCLOSURE: THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING. THIS REPORT IS A SOLICITATION FOR ENTERING A DERIVATIVES TRANSACTION AND ALL TRANSACTIONS INCLUDE A SUBSTANTIAL RISK OF LOSS. THE USE OF A STOP-LOSS ORDER MAY NOT NECESSARILY LIMIT YOUR LOSS TO THE INTENDED AMOUNT. WHILE CURRENT EVENTS, MARKET ANNOUNCEMENTS AND SEASONAL FACTORS ARE TYPICALLY BUILT INTO FUTURES PRICES, A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES AND OPTIONS CONTRACTS.



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About the author


Sean Lusk is a registered commodity broker and Director of the Commercial Hedging Division of Walsh Trading in Chicago. Sean began in the business as a runner on the trading floor during summer breaks from college in 1993. Upon his graduation from Southern Illinois University at Carbondale in 1996, Sean began his career on the trading floor of the Chicago Mercantile Exchange (CME). Overseeing billions of dollars of transactions working as a clerk in the Eurodollar pit, Sean took the next step and became a floor broker and member of the CME in 2003. He handled customer orders for banks and investment houses from all over the world from inside the Libor pit at the CME.

Now, at Walsh Trading, Sean utilizes his experience in the marketplace and his professional client service skills to aid and assist customers in their trading endeavors.  

He writes daily and weekly commentaries focusing on both the Precious Metals and Agricultural Markets along with related market activity.

Sean has been quoted in various media outlets discussing futures markets. 

These include:

 

  • Futures Magazine
  • Reuters
  • Forbes
  • Kitco
  • Nikkei Press
  • CCTV.com

 

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