GOLD
Gold closed at $1,528.80, up $5.20 for the day on active trading. Gold rose for a fourth straight session (the longest rally in three weeks) as Europe’s debt crisis increased investor demand for the precious metal as a protection of wealth. This rally is amazing in light of the strong U.S. Dollar versus the Euro. In Euros, Gold is trading at an all-time high, while in Dollars it is $50 from a record high.
Very Interesting Gold News Item:
Over the course of the past few months, one large buyer has accumulated approximately 50,000 gold call option contracts (5 Million ounces of gold)– most of the calls are strikes between $1,600 and $1,800 an ounce and for expirations between August and December. In total, as much as $50 million in call premiums (Approximately $10 an ounce) has been paid out by the buyer for the option to purchase. This is a huge bet in absolute dollars relative to the liquidity of the market. Considering that the calls are well out-of-the-money (today trades are at $1,526), and given the size of the purchase, the buyer is not likely an individual hedge fund — more likely, it is a central bank or a sovereign fund. If the Gold market rallies above $1600 by August or $1800 before December there could be a major short squeeze driving the market much higher.
SILVER
Silver closed up $1.62, ending the trading session at $37.71 an ounce on very heavy volume. Silver has broken out of the trading range and is now heading for $40. Silver was led by renewed interest in precious metals as a safe haven against any sovereign default. The storage of physical Silver helped fuel the rally as the Silver futures markets continue to be in backwardation. The U.S. mint is still 6 weeks late in delivery of Silver Eagles due to very heavy physical demand.
Today’s Other Important News
The selection of a new managing director of the IMF has given the BRICS countries an opportunity to flex their muscles. The IMF executive directors for Brazil, Russia, India, China and South Africa attacked the “obsolete unwritten convention” that the head of the fund is always a European, and are calling for a “truly transparent, merit-based and competitive process”. This is the first time the BRICS have unified to speak as one voice with the IMF.
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