By: Mike Hammer
An early Thursday morning trade on the New York exchange sent gold prices up, a trend that continued for most of the day. The trades were options contracts totaling 2.8 million ounces, which is about the same as 8 days at the recent average volume. Here’s the chart for GLD showing the price jump – notice that gold was trading sideways before the options trades crossed, then the quick swing, then the steady upward move over the course of the day.
(chart here, credit Fidelity)
There’s always talk of manipulation in the gold markets; your Gold Enthusiast has even participated. Executing large trades at times of low volume is one way of doing it, and this trade clearly meets those criteria. While the gold market is technically open at 8:15-8:30 in the morning New York time, that is pre-market time for stocks and options. Which means many traders aren’t at their desks yet, and volume is correspondingly low. At these times, a large trade has a bigger impact on gold prices.
In this case, this Gold Enthusiast doesn’t think this was an attempt at manipulation. If you want to manipulate gold, you really need to do it in the futures market, or the physical market. Options trades just don’t have the direct effect on prices that the other two markets do. In this case, it’s more likely that someone with big pockets wanted to place a high-stakes bet on gold prices moving up. We all know how the math works – If you’re right even a little, the way to magnify gains is by trading bigger volume. It looks like that’s what happened here – someone’s outlook for gold is very bullish in 2018. We’ll see how it plays out!
Are you bullish or bearish for gold in 2018? Do you think gold will rise above last year’s high of 1350? Or will we spend a year going sideways between 1265 and 1350? Let us know what you think in the Comments below.
Signed, The Gold Enthusiast
DISCLAIMER: The author has no position in any mentioned security. The author is long NUGT and JNUG, and may add to or sell these positions in the next 48 hours. These are small, wouldn’t-move-any-market size positions.