Gold and Silver Attacked on Options Expiry

Everything was proceeding apace this morning as Gold (AMEX:GLD) and Silver (AMEX:SLV) were in the process of being up strong for the third Friday in a row after a four sleep-inducing days of trading on Monday through Thursday.  Gold was up to $1785 per ounce, breaking through the peak at $1779 set earlier in the week while Silver finally bested $35 with authority pushing up to $35.25 before the capping action began.  A weekly close at those levels would be insanely bullish going into next week when the futures contracts will expire on Wednesday.

Today was options expiry for stocks and that meant limiting damage to the writers of puts and calls as much as was possible.  The massive rally in both metals would ensure that max pain could not be inflicted but it didn’t mean that the bullion banks couldn’t inflict a paper cut or two on their way out the door.  And, that is exactly what happened.

For the week Gold and Silver both ended up slightly over last week’s close.  Gold was up $2.80 for the week, closing on the October contract at $1772.85, while Silver actually closed down slightly for the week to $34.57 per ounce on the December contract.  The Silver futures curve is extremely tight and could easily slip into backwardation coming into Wednesday’s expiration which would be extremely bullish for the price.

Since JPMorgan (NYSE:JPM) is likely fighting for its survival in the Silver pits right now expect another heavy raid before the end of next week.  Remember next Friday is not only the end of the week, but the month and the quarter as well, so every HFT algorithm will be studying their Picasso this week as they attempt to paint the charts to their advantage.

 

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Tom Luongo

About Tom Luongo

Tom Luongo is a professional chemist and self-taught economist who has been following and trading stocks for nearly 12 years. He has no formal ties to the financial industry and considers that an asset in his analysis of the interplay between monetary policy and capital markets.

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