Gold Option Traders Most Bullish Since Bottom In October 2008

Tyler Durden's picture

From GoldCore

Gold Option Traders Most Bullish Since Bottom In October 2008

Today’s AM fix was USD 1,657.00, EUR 1,320.21 and GBP 1,046.48 per ounce.

Yesterday’s AM fix was USD 1,664.25, EUR 1,325.04 and GBP 1,051.66 per ounce.

Silver is trading at $30.78/oz, €24.63/oz and £19.50/oz. Platinum is trading at $1,528.25/oz, palladium at $631.80/oz and rhodium at $1,025/oz.

Gold fell $11.10 or 0.67% in New York yesterday and closed at $1,656.10. Silver slipped to a low of $30.55 and rallied back and forth then finished the day with a loss of 0.58%.

Gold Rose 67% Between October 2008 And February 2009

Gold is mostly unchanged as investors gear up for the US Fed chairman, Ben Bernanke’s speech tomorrow.

Market participants are focussed again on the short term and the silly “will he, won't he?” debate re Bernanke at the Jackson Hole symposium. 

Bernanke may again obfuscate and not give clear guidance regarding monetary policy and further QE.

However the smart money such as PIMCO's Bill Gross, Jim Rogers, John Paulson and others believe that further QE and money printing remain inevitable. We would concur and advise investors to fade out the short term noise emanating from Jackson Hole and from assorted policy makers on both sides of the Atlantic and focus on the reality that further monetary easing and currency debasement will continue for the foreseeable future.

There are continuing hopes that the ECB will deliver concrete plans next week that will help diminish the borrowing costs in Spain and Italy and an interest rate decrease is also being mooted.

The German Constitutional court decision on September 12th may finally put to bed whether Germany will allow the ECB to print euros in order to bailout periphery nations thereby debasing the euro.

The 6.5 billion euro Italian sovereign bond sale went well today but the auction again spotlights the country's massive debt burden and still high and rising borrowing costs.

A new and important bullish indicator for the gold market is that gold calls are at highs not seen since the October 2008 low as option traders go long gold in the belief that it will go higher.

It suggests that option traders believe that U.S. Federal Reserve Chairman Ben Bernanke will hint at or announce additional money printing and monetary easing at the Jackson Hole, Wyoming, symposium.

Alternatively, it suggests that they are bullish on gold due to the risks posed to the dollar and the risk of inflation taking off.

XAU/GBP 5 Year Chart – (Bloomberg)

The ratio of outstanding calls to buy the SPDR Gold Trust versus puts to sell jumped to 2.69 to 1 on August 24th and reached 2.76 earlier this month, the highest level since October 2008, according to data compiled by Bloomberg. 

Ownership of calls is up 26% since the July 20th options expiry. Ten of the most owned actively owned ETF option contracts are bullish.

Option traders are regarded as savvier and tend to be more sophisticated then the more speculative futures traders.

XAU/EUR 5 Year Chart – (Bloomberg)

Gold in October 2008 was trading at below $725/oz (see charts above). In the less than 5 months that followed gold rose 67.8% - from mid October 2008 to the high on February 12th 2009 at $1,215/oz.

A similar move today is quite possible given the long period of consolidation in the last 12 months and the strong fundamentals.

This could see gold rise from below $1,660/oz today to $2,785/oz in the first quarter of 2012 (see chart above).

For breaking news and commentary on financial markets and gold, follow us on Twitter.

Cross Currency Table – (Bloomberg)

(Bloomberg) -- U.S. Mint Gold-Coin Sales in August at 32,500 Ounces Top July
The U.S. Mint’s sales of American Eagle gold coins were 32,500 ounces so far in August, according to figures from the Mint’s website. The total for all of July was 30,500 ounces.

(Bloomberg) -- U.S. Mint Silver-Coin Sales in August Exceed July Total
The U.S. Mint’s sales of American Eagle silver coins have reached 2.52 million ounces so far in August, according to figures from the Mint’s website. Sales totaled 2.28 million ounces in July.

(Bloomberg) -- Gold ETP Holdings Rise to Record for Seventh Straight Session
Gold holdings in exchange-traded products backed by the metal rose to a record for the seventh straight session.

The amount increased 3.49 metric tons, or 0.1 percent, to 2,460.46 tons, data tracked by Bloomberg showed.

(Bloomberg) -- Ahmadinejad Says Capitalism Is on ‘Threshold of Collapse’
Iranian President Mahmoud Ahmadinejad urged countries to barter and use their own currencies for trade instead of the U.S. dollar and said capitalism was about to end.

“Domineering capitalism is on the threshold of collapse,” Ahmadinejad said told delegates at a Non-Aligned Movement meeting in Tehran today.

(Philstar) -- Central Bank of Philippines may buy gold abroad 
The Bangko Sentral ng Pilipinas (BSP) has warned it may be forced to purchase gold abroad for its reserve requirements should local sales of the metal continue to drop due to taxes levied by the government, a central bank official said.

“If nothing happens, we might be forced to downsize our gold refinery. The effect is that the BSP will not be able to buy gold using pesos,” BSP Deputy Governor Diwa Guinigundo told The STAR in a text message late Monday.

“While gold can be bought from the international market, this will have to be done using (foreign exchange). Foreign exchange reserves will not be increased in the process,” he added.

When asked when the BSP can say that it needs to buy gold abroad, Guinigundo replied: “This is a question of timing policy and therefore not for public consumption.”

Gold is considered as a safe haven in times of foreign exchange volatility, meaning, investors flock to it when currencies around the world are plunging in value to protect their investment. BSP, by law, is supposed to be the sole purchaser of gold from local small-scale miners.

(Bloomberg) -- Platinum May Rally to $1,735 on South African Output Loss: UBS
Platinum may climb to $1,735 an ounce within three months because of production losses in South Africa, which represents almost 75 percent of world mine supply, said Dominic Schnider, head of commodity research at UBS AG’s wealth management unit.

Global supply may drop 4 percent this year, returning the market to balance, Schnider said today at a briefing in Singapore. The surplus was 430,000 ounces in 2011, UBS data show. Spot platinum was at $1,523.25 at 11:39 a.m. local time.


Gold stuck in tight range before Fed speech - Reuters

Asian Stocks Erase Monthly Gain on Growth Concern; Oil Declines - Bloomberg

Growth worries dent shares ahead of Bernanke speech - Reuters

Turkey’s Gold Sales To Iran Largely In Bullion – Hurriyet Daily News


Gross: QE3 is Coming `Relatively Soon' - Bloomberg

$16 TRILLION ... "Banana Republic Stuff Plain And Simple" ... "Smart, Thinking People Ought To Be Planning..." – Zero Hedge

The Gold Standard Goes Mainstream - Wall Street Journal

Willie: Firestorms & Currency Twisters - GoldSeek

David Morgan bullish on gold and silver - saw ‘bottom' in May - Mineweb

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
GetZeeGold's picture



Oh good......I'm doing it right!


I was starting to doubt myself for a second there.


dlmaniac's picture

All it takes are 5 straight margin hikes and a little Sunday afternoon PPT fun then ...

GetZeeGold's picture're sooooo gonna get your ass junked for that!


gmrpeabody's picture

Well..., somebody's getting junked.  ;)

GetZeeGold's picture




It's called rope-a-dope we're actually winning. It just doesn't look like it.


Panafrican Funktron Robot's picture

Total nonsequitor, but assuming GLD remains solvent through Jan 2014, the 195/200 bull vert is cheap as hell imo.

Idiocracy's picture

Damn right, Mr Swhingh'n.  I feed CME cocksuka to hogs!

kindape's picture

isnt that bearish?

GetZeeGold's picture




You're holding it upside down.


Abitdodgie's picture

Another article about how gold is going to do something because the fundementals look right , who gives a shit it will move WHEN they say it will and not before . The price belongs to them .

Dr. Engali's picture

Frankly I think gold has some more basing to do before the next leg up. Although I would not be disappointed if it took off now.

Itch's picture

still technically a range until ~$1800 is broken...

owensdrillin's picture

Turd sure thinks that there is going to be a huge run up for some reason before Sept. 21. It will happen one day and what sets it off is anyone's guess.

He alludes to some sort of inside info but won't say what it is. Maybe GLD options are a decent short term trade as long as you get paid if the wheels come off. I did great on them last year to begin with then got shitkicked on my Jan/12's.

Race Car Driver's picture

Margin hikes and naked shorts, bitchez.

GetZeeGold's picture



Mitt wins and Ben Shalom is out of a job......what do you suppose he's going to do?


gmrpeabody's picture

I've noticed you get junked a lot...

For no apparent reason.

GetZeeGold's picture



It was raining in the OWS gang showed up here.

Juan Wild's picture

write his new book: "How I Created the Great World Depression"

Stoploss's picture

Paper traders............ WEeeeeeeeeee.. LOL!

rehypothecator's picture

Ahmadinejad Says Capitalism Is on ‘Threshold of Collapse’

Like so many others, he is wrong.  What we have here is crony corporatism and in Europe is socialism, both of which are on the verge of collpase.   Capitalism has nothing to do with either.   

GetZeeGold's picture



Ahmadinejad Says Capitalism Is on ‘Threshold of Collapse’


Things are so tough in Tehran.....they only have the 10 year old newspaper.


kindape's picture

you are correct. capitalism collapsed long ago.

pragmatic hobo's picture

at the limit of some sort, capitalism approaches crony-capitalism. It's human nature as evidenced by several thousand years of history.

Dr. Engali's picture

That's what drives me nuts, they continue to sell the lie that this is a capitalistic system. Without bankruptcy as the ultimate regulator we have nothing that resembles capitalism.

seek's picture

Exactly, the hallmark of capitalism isn't capital, it's failure. You can instantly diagnose how capitalistic a system is by how much failure (and scale of it) that occurs.

I think they're selling this lie, so that when it blows up they can say "see, capitalism got us in this mess, this is why we need to form a global government based on X" with X being socialism/communism/dictatorship/whatever gives TPTB the most power at least cost.

gmrpeabody's picture

Seems there's a very fine line between capitalism and fascism.

Biosci's picture

A better question might be, is fascism the inevitable result of capitalism?

ParkAveFlasher's picture

Fascism is the inevitable result of humanity.

beachdude's picture

Right. Government controlled capitalism is fascism.
Good read...
"America formally abandoned capitalism with the passage of the Sherman Antitrust Act in 1890. Since that time, businessmen have increasingly used political connections to achieve their business ends."

zhandax's picture

Back to the beach, dude.  What this country needs more than anything else (other than divorcing money from politics) is to dust off the Sherman Anti-trust act and wield it like a fire axe to cut all these multinationals off at the knees.  As soon as a corporation's asset size hits a pre-determined percentage of GDP (<1%), they are banned from all M&A activity, and at the next threshold, they hit a 90% tax rate with no deductions/exclusions.  Who do you think bought the government?

TheWord's picture

Ummm...that's actually a bad sign?


Who is this post from?  Not the Tyler I know.

TheCanadianAustrian's picture

Never engage in a battle of wits with an unarmed market. Buy and hold.

PaperBear's picture

I hope they are correct because I have a little cash in silver’s call covered warrant SP48 expiring on 21st December at the strike price of $60.

fredquimby's picture

I have silver 55+ for March 15th 2013 and have been steadily adding to it since this "dip" started.... I will be an extremely happy camper if your bet comes in....and I think we still have a chance as it stands, but another dip to 20 will kill it for us for sure... #chaaaarge



ParkAveFlasher's picture

I have extraordinary respect for ZHers who make calls like this. +1 both

youngman's picture

When and if any of the options traders stand and take delivery....then we will see the fireworks....but as of now..its just another room in the casino to play in....the metal is where its at....its not on the casino floor...its high up in the penthouse with all the hookers and booze.....those are the real players

GolfHatesMe's picture

Flirting with 13k at 10:28 EST?  Have no fear PPT is here in 2 min.

FranSix's picture

Options chain normalizes for October expiry(that might change before the end of September):

steve from virginia's picture


A new idea is needed beside the tired meme of 'money printing' by 'Bernanke' leading to 'hyperinflation/currency debasement' pushng gold prices/causing a return to a gold standard. It's nonsense.


We already have a petroleum standard ... that's kicking our ass.


If there is ever a gold standard the economic ground rules will have changed and few would want to live with them.


Credibility of currencies as well as institutions is being measured, not quantity of money in circulation. What is circulating is debt, what exists now cannot be serviced without taking on more debt ... this is hardly debauched currency.


Currency cannot be found in anything like meaningful amounts: where is the money?


The question is: what comes after the euro disappears? Why shouldn't the yen, pound-sterling, RMB or even dollar disappear as well, for the same reason? That's why gold looks good ... 




A world where gold is needed to buy gas is a world without cars, a world without modernity itself.



Bastiat009's picture

Everybody is bullish gold but it's not going up. Everybody is bearish stocks but indexes are going up.

What should I believe? What is happening or what I am told is happening?

I too only believe the people who tell me what I want to hear, especially when it's flattering.

darteaus's picture

FTA:  " calls are at highs not seen since the October 2008".

HAHAHA.  Well, then it's time for a BOATLOAD of sheep to be sheared then, as the gold market is THE most manipulated market of all.

ParkAveFlasher's picture

Just keep stacking, ya bunch-a mary's!!!

fredquimby's picture

Option traders are regarded as savvier and tend to be more sophisticated then the more speculative futures traders.

Nah, I just buy as many as I can and hope for the best :)

pupton's picture

"This could see gold rise from below $1,660/oz today to $2,785/oz in the first quarter of 2012 (see chart above)."  WTF?  Do they mean "2013"?  Play silver if you think gold is going higher...silver will go MUCH higher in percentage terms.

FiatGold's picture

@pupton, historically you are correct on the silver.  Gold and silver will always rise in the future.  for me, stacing both is a hedge against inflation.   Who wants to waste their cash on T-bills or a CD?  I am holding AAPl that I bought in 2007 at 105 and that is my exposure to equity.  An ounce of gold or silver in my hand is not a promise to be paid, but proof I have been paid in full.



c-rev with a twist's picture

I think drawing these conclusions based on options activity is a very slippery slope and will ultimately lead to the destruction of said author's portfolio.  Big money will use gold (or silver) calls going into Uncle Ben, hedge against something like VIX calls.  It's an trading strategy, not a refernendum on more QE.  Get a grip man.