There are two significant events this week that could exert pressure for higher gold prices. Because of this, I expect to see major behind-the-scenes actions to try to suppress gold (and silver) prices until the middle of Thursday afternoon.
First, the U.S. government’s Treasury debt auctions will sell the greatest amount of debt ever sold in one week. The net debt increase of $153 billion is so high it will exceed the current authorized federal debt limit. Flooding the financial markets with so much debt is a sign of weakness for the U.S. dollar. As the dollars declines in value, the price of gold in U.S. dollars invariably rises.
Second, we will also see the expiration of options contracts in two days. If the spot price at the close of trading on the day that gold (and silver) options contracts expire is higher than the contract price on a call option, the owner will exercise the option to demand immediate delivery of physical gold. The higher the price of gold, the more call options that will be exercised. Conversely, a lower gold spot price will reduce the demand for gold for immediate delivery. There is a major block of call options at $1,050, so expect prices to stay below that level through Wednesday night.
Gold Blast-Off Starts Friday?
There are two significant events this week that could exert pressure for higher gold prices. Because of this, I expect to see major behind-the-scenes actions to try to suppress gold (and silver) prices until the middle of Thursday afternoon.
First, the U.S. government’s Treasury debt auctions will sell the greatest amount of debt ever sold in one week. The net debt increase of $153 billion is so high it will exceed the current authorized federal debt limit. Flooding the financial markets with so much debt is a sign of weakness for the U.S. dollar. As the dollars declines in value, the price of gold in U.S. dollars invariably rises.
Second, we will also see the expiration of options contracts in two days. If the spot price at the close of trading on the day that gold (and silver) options contracts expire is higher than the contract price on a call option, the owner will exercise the option to demand immediate delivery of physical gold. The higher the price of gold, the more call options that will be exercised. Conversely, a lower gold spot price will reduce the demand for gold for immediate delivery. There is a major block of call options at $1,050, so expect prices to stay below that level through Wednesday night.
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This entry was posted on Tuesday, October 27th, 2009 at 3:29 pm and is filed under Dollar, Gold, Market Commentary, Silver. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.