Explaining Gold Options Technical Traders Ltd.

Explaining Gold Options Technical Traders Ltd.
Gold Price Holding Up Well But Next Catalyst Unclear | Gold Silver ...
Ukraine deal, ETF selling push gold price below $1,300 | MINING.com

Posted: 15 Apr 2014 11:07 AM PDT

Gold Options Trading

Gold options allow investors to buy or sell gold bullion at a future date (date of delivery) at a set price. The quantity of gold, date of delivery, and price are all preset. As the name implies, trading gold with options is merely an option, not a requirement, so investors are not obliged to either buy or sell gold at the end of a contract.
Options shouldn't be confused with futures contract. While options and futures work the same way (both having a pre-determined price and expiration), the futures contract is an obligation and therefore should be upheld. The difference between gold options and gold futures will be further explained below.

Gold Option Exchanges
Investors who wish to deal in gold options can purchase contracts at the New York Mercantile Exchange (NYMEX) and Tokyo Commodity Exchange (TOCOM). NYMEX gold options are traded per 100 troy ounces of gold, while TOCOM gold options are traded per 1000 grams of gold. These numbers are the minimum purchase requirements before a contract can be made and cannot be lowered due to any circumstances.

Call and Put Options
With gold options, investors can partake in two different trading classes called c alls and puts. It's technically just buying and selling. Calls are made by investors who think that gold prices will be bullish in the future. On the other hand, puts are made when gold investors predict that gold prices will be bearish. Having good fundamental and technical analysis skills are necessary in order to make a decent call and put decisions. Technical analysis is examining patterns on price charts in order to make a good inference on gold's price movements. For closer inspection on this, refer to Bullion Vault's live price graph to see today's gold price patterns. However, fundamental analysis is aided by being up-to-date with the news and current events that can affect the price movements of gold.

Gold Options vs. Gold Futures
Apart from the option/obligation explanation, there are other things that differentiate gold options from options. Here are some of them:

Minimal losses
Investment losses in futures trading can be felt immediately due to their margin requirements. It's also possible for traders to lose more money than they intended because of this. Although, options buyers know exactly what they're getting. Before investing with options, they know how much they're getting in the end and their maximum possible loss.

Leverage Benefits
It's easier to gain leverage in options because the premium payable in it is much lower than the minimum required from investors to deal in underlying gold futures. Having leverage may induce reduced profits but at least it won't be as big as when having borrowed funds in futures.

Gold Price Holding Up Well But Next Catalyst Unclear | Gold Silver ...

Posted: 10 Apr 2014 01:51 PM PDT

Gold has shown strength in today's trading session. Last week, the yellow metal was trading near $1280, a huge support zone and key inflection point which has held very well. Now, it seems that $1300 is holding as well, a sign of strength, at least short term. Dan Norcini discusses the technical picture in more detail. He explains the current state of the gold price based on the charts and his expectations going forward.

Yesterday's FOMC minutes continue to put pressure on the US Dollar, but even more importantly, acted to depress US interest rates. That is the key driver for gold in my view at this time. Gold seems to struggle when interest rates here in the US rise as investors see little threat of inflation and seek out assets that will throw off some sort of yield rather than the yellow metal which only provides gains if it continues to rise in price. In a benign inflation environment, many do not believe gold will continue to rise.

From a chart perspective, gold continues to remain within the broad trading range outlined for some time now. It will need a catalyst of some sort to kick it higher or send it lower. What that might be remains unclear to me.

The chart shows that gold has run into some selling near the resistance level noted near the $1320 region. Above that, resistance is layered in approximately $20 increments, first near $1340 and then again near $1360. Downside support comes in near and just above $1300 followed by our old friend near $1280.

On the ADX, which indicates a trendless market, the bulls have regained the short term advantage. Stochastics are rising as price moves up in the range showing the near term friendly picture. How this market handles this $1320 level today and tomorrow, will be a key as to how to approach it. The trading range is pretty broad (up near $1400 on the top and $1280 on the bottom).

I cannot see what would cause this market to break out of its current range at this time. The Dollar would either have to drop off sharply breaking down below 79 on the USDX or interest rates would have to plummet sharply here in the US, along with perhaps a larger selloff in the broader equity markets to take it up out of the top end of the range. On the downside, we would need to see a sharp rally higher in the US Dollar and a surge in interest rates above the 3% level in the Ten Year to take it down below $1280 in my view.

Take a look at Eurogold. Notice how it too is essentially rangebound. The ADX reveals the lack of a clearly defined trend. The top of the range is up near the 1000 euro region; the bottom down near 880 – 860. If gold could clear the 1000 euro level, we might finally have something to write about. If the ECB were to actually proceed with their chatter about their own version of QE and forcing banks to pay interest on reserves held there at the ECB, then we might finally see the Euro weaken sharply enough to send gold higher and through that 1000 level.

Apparently Europe is having the same problems over there as we are over here – a lack of inflation and in their case, an excessively strong currency, which no one over there wants.

The gold mining shares are providing little if any support to gold judging from their mediocre performance today. One gets the impression that they do not know whether to follow the broader market lower or the metal higher. Either way, it is not exactly a ringing endorsement of further strong gains in the actual metal.

Ukraine deal, ETF selling push gold price below $1,300 | MINING.com

Posted: 17 Apr 2014 03:40 PM PDT

The price of gold ended the holiday-shortened week below the psychologically and technically important $1,300 level on Thursday after tensions between Russia and the West over Ukraine eased.

On the Comex division of the New York Mercantile Exchange, gold futures for June delivery settled at $1,293.90 an ounce, down $9.60 from yesterday's close and suffering a 1.9% drop for the week.

Top diplomats from the United States, European Union, Russia and Ukraine in marathon talks on Thursday agreed to take steps to ease the crisis which took away some of the allure of gold as a safe haven asset.

Russia sidestepped tougher economic sanctions in the process and worries over energy supply in Europe, which buys much of its natural gas from Russia, receded.

The agreement, hammered out over seven hours of talks, calls for the disarming of all militia groups and for control of buildings seized by pro-Russian separatists in the east of the country to be handed over to Ukrainian authorities in return for amnesty.

The gold price was also hurt by renewed profit-taking ahead of the Good Friday long weekend when many markets in the West will be closed for trading.

Investors continued to pull money out of the SPDR Gold Trust (NYSEARCA:GLD), the world's largest physically-backed gold ETF accounting for some 40% of total holdings in the industry.

Holdings in GLD dropped to 795.1 tonnes or 25.5 million ounces on Thursday, the lowest level since February and down 26.4 tonnes in less than three weeks.

Image of statue of Lenin in Illichivsk in the Odessa Oblast by lentina_x

Explaining Gold Options Technical Traders Ltd.

Explaining <b>Gold</b> Options Technical Traders Ltd.

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