The Fed is Breathing Life into Gold Bulls
Thursday, volume and prices spiked on call options giving holders the right to buy Gold at higher prices.
Wednesday, investors poured $413-M into SPDR Gold Shares (NYSEArca:GLD), the largest ETF backed by the metal, recouping almost 50% of the money that exited in January.
The Fed kept interest rates steady this week after a 2-day meeting, but it gave no clue on when it might next tighten monetary as officials grapple with the uncertainty created by the Trump Administration.
In December the FOMC telegraphed 3 rate hikes for Y 2017, not likely now.
Gold prices have rebounded about 6% YTD, helped by a weaker USD and demand for the precious Yellow metal as a safe-haven, after posting the worst quarterly loss since Y 2013.
There is no immediate concern for a Fed rate hike, meaning the Green Light on for the precious metals to move higher. The weakening USD and the lack of concern of a Fed interest-rate hike, along with higher inflationary numbers in the market support Gold and Silver.
Call options giving holders the right to buy March futures at $1,250 oz jumped 84% Thursday, the biggest increase since the contract began trading in June 2015. That was the most-active gold option, with volume surging more than 6X this week. The 8 most-traded options Thursday were calls, with prices rising at least 34% for each.
- Apr Gold ended today’s session + $11.20 (+0.9%) at $1219.60/oz.
- Although this morning’s USD move was not commensurate to the rally in Gold this morning, Fed comments on inflation and recent inflation readings lean positive for Gold.
- Mar Silver closed Thursday’s session -0.04 (-0.2%) to $17.42/oz.
|HeffX-LTN Analysis for GLD:||Overall||Short||Intermediate||Long|
|Neutral (-0.10)||Neutral (-0.21)||Neutral (0.08)||Neutral (-0.18)|