Well, the floor closed GCZ7 at 809 today so 850 in now well within reach this month. I hope you guys are making some coin but always remember to set stops to lock in profits as the volatility in both directions is sure to keep traders on their feet. For instance I should have taken profit on silver twice this week when I was well over 5 figures in profit but gave it back due to the volatility. Today though I got that back and then some but stops are in place now since the mood in the metals complex can change very quickly, especially if Crude pulls back. Bear in mind that FND for this contract is about 3 trading weeks away and there is a huge build-up of call options at higher strike prices. Therefore there could be a larger run-up to come just prior to options expiration. If prices do runup I strongly suggest entering trailing stops to lock in some coin along the way...
With December contracts expiring within weeks, it would appear that the commerical producers continue to sell higher priced gold contracts to the funds and small specs. Even though the gold price has gone up by about $70 or more since the CFTC reports started showing high levels of short interest. Unless there is a major selloff in crude or a major rally in the DX in the next couple of weeks, it would appear that the commerical producers will intend to make good delivery on these contracts. As a result, the losses will be painful for many of them but not entirely disaterous. The commericials are never 100% correct but more times than not, they are able to correctly gauge the gold market and they always attempt to deliver less gold than they otherwise need to by covering futures at lower prices. So in essence what I am getting at here is that the commercial players do not seem to mind their huge buildup of short contracts as they are more likely interested to sell gold product at this point. The commercials can get even more short and this would not necessarily be a bearish development. It would be best to strictly analyze the technical structure of the current gold price rather than just the commercial interests at this particular juncture strictly because the overriding fundamentals are just too powerful for gold moving forward. I would still love to see a grueling correction in gold prices but my gut tells me that a trip down to 770 would be the worst possible outcome at this juncture. More likely though a retest of the 800 cash level is as good of a correction to expect now since there are multiple levels of buying support already established under 790 I believe...
The commercials have been right consistently for a very long time. That doesn't mean they will always be right. I read on an lemetropol email that Goldman sacs was covering a large number of their short contracts about a week ago. When the commercials have to deliver at a higher price than they sold, it won't change anything cash wise for them at that point because they got cash when they sold lower. But what will change is that they will have to report a loss for the difference on both what they delivered, plus a mark to market loss on what shorts are outstanding.
Goldman is not classified as a commercial entity actually. They do hold seats on both NYMEX and TOCOM as large traders / fund specs though. The commercial designation is only reserved for exchange members that are in the business of actually mining, producing or refining precious metals. But yes, they have been covering their short positions at a blistering pace as of late albeit at a nice loss I'm sure
So far this is what has transpired as cash gold went down to 800.10 last night and has since rebounded to 806. Of course we could still see a further push lower than 800 however I wouldn't count on it. If there is another push lower than 795 might be a support target. Still gunning for 850 sometime this month though, maybe even 900 if the DX breaks under 76...
Thanks for the feedback Bootsie... I am probably spending more time here than I should be but I believe that many traders that visit the metals threads are at the forefront of witnessing a seismic shift in the precious metals arena...