Monday, May 2, 2011
Gold This Morning: The Last Waltz --Jon
Substantial and imposing overnight trade opened and ran to record highs before a sudden collapse triggering stops ran gold down more than $30 bucks to the low $1540s. The event catalyst is obvious; clearly the Bin Laden news was seeping into markets markets where the GSR and RSI momentum was vulnerable. The facts: GSR rose around 2 handles to ~34.50 taking some manic edge off of silver and gold RSI at ~80.0 while well into an overbought area should not provoke a text-book knee jerk since the gold buying build has hardly been frenzied. Gold open interest as of last Thursday eased ~5,000 contracts to 532,636...take that as under-owned. COT numbers released Friday had large and small specs as significant sellers and the ornery commercials both buying and short covering continuing a counter-cyclical pattern that would not appear at any market top. Before we segue into the 'Today' view, I want to thank those of you reading my morning 'exercise' on gold since this will be the last one. As I have traveled across the US for the past two weeks speaking with both clients and people I have encountered on my blue-collar voyage I have concluded that my New York proclivity that only we get it is a fanciful and unfounded prejudice. 'They' are not naive nor parochial and grasp the deceptive truism of the leveling of the global economic and social playing field. So while you should continue to view gold as completely mis-priced I shall only occasionally refer to it as I devote my focus back to the great game of emerging and frontier markets. Today: Option volatilities this morning have literally blown out... Junes are trading ~16.5 and AUGS ~18.5...there remains factual evidence of physical shorts which will impact paper prices if delivery is not possible...stay the course.