The Fed is Breathing Life into Gold Bulls

The Fed is Breathing Life into Gold Bulls

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)

Stay tuned…

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

2 Responses to "The Fed is Breathing Life into Gold Bulls"

  1. David Smith   February 2, 2017 at 4:56 pm

    “SPDR Gold Shares (NYSEArca:GLD), the largest ETF backed by the metal”

    This is highly questionable. Paper gold GLD claims to be fully backed by physical gold bullion but yet it refuses to give retail investors the right to redeem for any of these ‘claimed’ gold bullion. This fact alone would mean GLD shares are nothing more than paper at the end of the day. Furthermore, GLD’s prospectus is chalk full of weasel clauses and legal loopholes that allows the fund to get away without the full physical gold backing. One good example of this is the clause that states GLD has no right to audit subcustodial gold holdings. To this day, I have not heard of a single good reason for the existence of this audit loophole. I’ve also verified the following to be true and welcome everyone else to do so:

    “Did anyone try calling the GLD hotline at (866) 320 4053 in search of numerical details on GLD’s insurance? The prospectus vaguely states “The Custodian maintains insurance with regard to its business on such terms and conditions as it considers appropriate which does not cover the full amount of gold held in custody.” When I asked about how much of the gold was insured, the representative proceeded to act as if he didn’t know and said they were just the “marketing agent” for GLD. What kind of marketing agent would not know such basic information about a product they are marketing? It seems like they are deliberately hiding information from investors.”

    “I remember there was a well documented visit by CNBC’s Bob Pisani to GLD’s gold vault. This visit was organized by GLD’s management to prove the existence of GLD’s gold but the gold bar held up by Mr. Pisani had the serial number ZJ6752 which did not appear on the most recent bar list at that time. It was later discovered that this “GLD” bar was actually owned by ETF Securities.”

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