Gold Silver Reports – Gold Rally has Legs on Voracious China Demand, Bullish options – Gold’s breakneck rally eased this week, but tailwinds in both physical and paper markets suggest it’s got room to run.
Gold Bullish Options
Chinese New Year buying and option prices suggest the stars are aligning for the metal to extend its 6% gain over the past month.
“I’m always a bit nervous when gold prices rise this much, this fast,” said Mark O’Byrne, marketingdirector of bullion dealer GoldCore Ltd. “But there certainly is healthy demand from China and the futures market—I think we should break highs above $1,400 later in the year.”
Options traders are betting on at least another month of rising prices. They’re charging more for benchmarkcall contracts than for similar puts, and by the biggest premium since November. The bias, measured in implied volatility, has increased to about 0.6 percentage points.
Gold tends to do well in January and February. That’s when demand spikes in the biggest consuming nation, China. Over the past decade, the metaladvanced by about 6 percent on average in the first two months combined. The Lunar New Year, which is often celebrated with gifts of gold in much of Asia, falls on 16 February in 2018.
Read More: MCX Gold Expected Trading Zone Between 29510—29860, Sell on Rise
Still, a technical indicator points to a rally that may have grown tired.
The metal, which reached a four-month high this week, crossed into 2018 with an eight-day rally, thelongest string of increases since 2011. Now, it’s considered overbought, according to the relative-strength index, a gauge of momentum.
As gold is quoted in the US currency, its upswing largely depends on whether the greenback’s losing streak continues.
Option prices signal thattraders foresee the dollar falling over the next month against the euro, yen and pound. That’s good news for bullion: The 120-day price pattern is close to its strongest negative correlation since late 2012. – Neal Bhai Reports
