Gold’s bearish streaks have continued last weekend’s slumps, XAUUSD was trading at around $1,286.10 areas with momentary selling momentum while articulating. But the major trend of this precious metal has gone in the consolidating phase.
Amid equity markets moving to fresh year-to-date highs, the global equity strategists remain constructive, seeing the current market backdrop as very similar to the 2015/16 mid-cycle correction episode, rather than the end of the cycle. This could, in theory, begin to increasingly erode any built-up “safe haven” gold demand.
To this end, despite a reduction of more than 38,000 contracts last week, net non-commercial positioning on Comex still stands just below 100,000 contracts long.
OTC Updates for Bullion Market:
Please be noted that the positively skewed IVs of 3m XAUUSD contracts are still indicating the upside risks. One could see a bullish risk reversal setup. To substantiate the above bullish sentiment, bullish neutral risk reversal (RRs) numbers indicate overall bullish environment.
The above risk reversal numbers have been known as a gauge of gold’s underlying market for bullish opportunities. Well, we know that options are predominantly meant for hedging a probable risk event in the future.
Options Strategy: Contemplating the prevailing dips of gold price in the short-run and OTC indications, bullish neutral risk reversals of gold, longs in gold via ITM call options look to be attractive.
Buy 3m XAUUSD (1%) ITM -0.69 delta calls on hedging grounds. If the expiry is not near, delta movement wouldn’t be 1-point increase with 1 pip in the underlying movement, which means if the spot moves 1 pip, depending on the strike price of the option, the option would also move less than 1. Thereby, in the money call option with a very strong delta will move in tandem with the underlying. Courtesy: JPM, Sentrix & Saxo
Currency Strength Index: FxWirePro's hourly EUR spot index is flashing 72 (which is bullish), while the hourly USD spot index was at -32 levels (mildly bearish) at 12:33 GMT.
For more details on the index, please refer below weblink: http://www.fxwirepro.com/currencyindex