Gold prices traded slightly higher in afternoon trading despite finishing the day session lower by $2.40 to settle 1253.1 basis June futures. The FOMC minutes were released after the close and revealed no major hawkish surprises. Despite some chatter in the market about the Fed not raising rates in June, market participants seem passive as there is an assumption ofa matter of when not ifconcerning any further tightening measures this year. While geo-political fears in Washington and on the Korean peninsula have subsided this week, traders may not want to be short heading into a three day holiday weekend. It is also important to remember that it is June Gold options expiration on Thursday May 25th. FOMC votingmembers in their minutes agreed that the Fed should begin to unwind their large balance sheet by capping securities purchases and reinvestments. While gold is currently trading $7.20 from the low of the day as of this post following the minutes release may reveal hints that investors view the Fed's actions as inflationary. Those looking for volatility may consider the following options trade. Using week 1 weekly options that expire on June 2nd, consider the following option strangletrade. Buy the June week 1 1280 call and atthe same time the June gold 1240 put for 4 points or $400.00. The risk on this option strangle is the price paid plus all commissions and fees. The Gold market has paused at this 1250 level-1260 level. I believe either two scenarios into next week, either we rally to 1287 on continued safe haven buying , or we challenge significant support levels at 1243 and then 1230 next week into and throughthe non-farm payroll next Friday.
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.
Sean Lusk
Director Commercial Hedging Division
Walsh Trading
312 957 8103
888 391 7894 toll free
312 256 0109 fax
Walsh Trading
53 W Jackson Suite 750
Chicago, Il 60604
