These trade recommendations are brought to you by CPM Group. Due to market conditions, the views and positions of trade recommendations can quickly change. We strongly advise you to monitor our published trade recommendations on an ongoing basis.
CPM issued a Sell recommendation for gold on Tuesday 6 July, when gold was at $1,795 / £41.49, testing $1,800 / £41.60. The view was that gold had the capacity to trade back down to $1,780 / £41.14 over this week and next week, before rising later in July. Gold prices broke above $1,800 / £41.60 on each day this week so far: 6, 7, and today, 8 July. Prices are now testing $1,820 / £42.07. The major factor behind the move appears to be the sharp drop in 10-year Treasuries. The dollar is mixed against major currencies, and there are no fundamentals readily visible at this time. Silver meanwhile remains below $27 / £0.62, continuing to be unable to mount a significant rise. This supports CPM’s view that gold may drop back below $1,800 / £41.60 and possibly test $1,780 / £41.14 or even $1,770 / £40.91 in the next seven trading days. From that short term trading perspective, we would remain short. If prices break forcefully above $1,820 – $1,824 / £42.07 – £42.16 there could be a wave of stop-loss buying and fresh long buying that could take prices sharply higher. CPM continues to expect higher prices in the second half of July, but it may be too early for such a move. Thus, we would expect gold prices to subside before mounting such a larger move. (And, we would expect gold prices to subside in August after any such a move, as has been the experience in 2019 and 2020.) Investors also could buy August or October call options to protect their short positions and to benefit from any further price increases. Based on the August Contract at $1,809 / £41.81 earlier this morning an August $1,830 / £42.30 call option was offered at $13.50 / £0.31. An October call is more expensive, but gives invstors both more time to protect any shorts and also the potential to benefit if CPM is correct about a late-July price increase. The October $1,830 / £42.30 calls were priced at $28.50 / £0.66 asked.
Notes: Initial Target Prices and Timeframes are just that: Initial. If CPM does not issue a new Recommendation during or after that time it indicates that CPM is maintain the posture in the most recent Trade Recommendation. Discretion should be allowed at +/- 0.20% of the price at the time each TR is issued from the target. Recommendations are valid until the target date or a new Trade Recommendation or message is issued by CPM. CPM’s preferred investment strategies use physical, futures, forwards, and options. US$/GBP exchange rate used: 0.72