Gold Prices: Bolstered by Big Activity on Thursday

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.

 Related: Indian Gold Imports Exceeded Expectations – And Here’s Why

About the author

Mike Hammer

Mike Hammer has had a wide-ranging career, with trading and investing as a continuing theme. Mike graduated from UC Berkeley with a business degree, then worked with Macy's in their operations arm. He left Macy's and spent a summer trading his own account, which taught him a lot about trading in general and markets in particular. Trading through the Black Monday and the Crash of 1987 showed him how most people are unprepared for upheavals in their trading. He then joined Waddell & Reed as a financial advisor, helping regular people understand their finances and meet their life goals.

Then came the usual story - Mike met and married the lady of his dreams. They moved to upstate New York, where Mike worked first for a small manufacturing consulting company, then Cornell University. While loving the work and the higher-education atmosphere, Mike missed the world of finance. Eventually, he signed up for stock trading coaching with the Adam Mesh Trading Group, to learn from people who understood modern markets. Within a year, Adam asked Mike to become a stock trading coach.

Since then, Mike has trained over 200 individuals, spoke at several national conventions, and is a frequent contributor to conference calls across the Adam Mesh community. Mike writes The Gold Enthusiast daily newsletter, runs the Golden Hammer trading service, and participates in the Mesh Private Portfolio. He also keeps a position in international education which keep him in touch with "the student mindset". Mike closely follows the gold, energy, and financial sectors. His motto is "Plan your trade, then trade your plan!"

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