Tuesday, July 28, 2009

Gold Attacked on Comex as August Options Expire Today

As is typical when it's options expiration day for the front-month Comex gold futures contract, the price of gold was aggressively slammed this morning with no news to explain fundamental reasons and no movement in other correlating commodities to explain technical reasons.

Based on the "structure" of the open interest in calls and puts, the big banks, who typically write/sell futures options to speculators, can maximize their profits if they can force August gold to close below $940 at the end of Comex trading today. We'll see if they can get that done.
This week is also "roll" week, in which anyone who is long August gold futures and is not going to take physical delivery has to liquidate their long position by the close of trading Thursday, which is the day before 1st notice day on Friday (1st notice day is the first day delivery notices are assigned, and those taking delivery must have their delivery pre-funded by then).
Roll week is usually a week in which it is easy for the the large Wall Street banks with big short positions in gold futures to put excessive downward pressure on the price of gold, as a lot of selling in the front-month contract occurs as speculators are forced to liquidate front-month positions.

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