In my last writing, over a week ago, I discussed the new found life of call options that had been left for dead during the time that the only outlook for gold seemed to be to the downside. Gold has been bound by an approximately100 dollar range for months (1530-1630). I wrote in my previous post that while there was certainly more bullish sentiment on gold, that the range-bound story would hold until we broke at least above 1635..... We never did. We stalled around 1632 last week, and have yet to push through. While we are now consolidating on the high end of the range, there is little hope for a breakout in the near term.
There is plenty of back and forth (as there should be) about the validity of the jobs report. Whatever the reality however, the perception was that Friday's report was not so bad. Gold struggled on the news, as the pattern (from the last 2 reports) seems to be that a good jobs report means a sell off for gold (and vice versa). But the way in which it took place, served as what I believe to be the nail in the coffin for any excitement in the gold market in the coming weeks. Front month gold option volatility got crushed, plummeting nearly 2% on the day. Today, that volatility came in even more.
As we stand, we are still in the midst of the 100 dollar range, and we now enter the historically slow month of August. Despite what could have been a very momentous market week last week (given the jobs report/ Draghi commentary etc) we moved very little. A seasonally slow month coupled with limited data forthcoming equals a slow August to my mind.
I do see gold having a positive bias to the upside, but I think it is limited. Even if we are to break 1630-1640, we run into 1650 area, where gold had shown significant consolidation before dipping into the aforementioned range. Hopefully some news comes to jolt the market, but for now, we can look forward to a rather uneventful August.
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