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« The End of the Gold Bull Market | Main | SPDR Gold Trust (ETF) Call Options Competition »

Gold Prices Observations 19 May 2010

USD Chart 19 May 2010.jpg

The volatility continues across the markets and is aptly demonstrated here by the USD which started the day heading south and then bounced to gain 1.39%. Gold prices drifted lower in Hong Kong and in London before heading higher in New York as the chart shows. We have warned about volatility increasing and becoming the order of the day, so hang on to your hard hats and your position in the gold and silver sector as they will reward you in time.

Going forward get used to the idea of $100/oz movements per day in gold prices and say $2.00/oz per day for silver prices, then you will not be taken by surprise and not shook out of your position. We are heading into the summer season which can be a little lacklustre in the precious metals space, however, with the European pantomime going from bad to worse this summer may be a tad more active than usual. The new government in the UK will no doubt open the books and shock horror, the financial skeletons in the cupboards will come life with alarming frequency having a knock on effect on the pound. The race to the bottom for currencies will gather pace and now appears to almost unstoppable, the pound, the Euro and the US Dollar are all in deep pooh.

Gold Chart 19 May 2010.jpg

In a missive from Jim Sinclair today he summarised the action as follows:

The euro below $1.20 would strongly suggest Chairman Volcker is right on the subject.
The euro below $1.10 would confirm that Volcker is correct.
Presently there is key support at $1.2150.
The euro today traded as high as 1.2448 and dropped below $1.2150 trading now at $1.2202. That is outrageous activity for a major currency
There is no central bank nor is there any intervention that can stand against the tool of credit default derivative swaps. Gold is you're only safe harbor.

Keep smiling its all falling into place for gold and silver bugs.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.

The latest trade from our options team was slightly more sophisticated in that we shorted a PUT as follows:

On Friday 7th May our premium options trading service OPTIONTRADER opened a speculative short term trade on GLD Puts, signalling to short sell the $105 May-10 Puts series at $0.09.

On Tuesday the 11th May we bought back the puts for just $0.05, making a 44.44% profit in just 4 days.

Dont forget to enter the competition to win a free subscription, click here.

Accumulated Profits from Investing $1000 in each OPTIONTRADE signal 14 May 2010.jpg

Recently our premium options trading service OPTIONTRADER has been putting in a great performance, the last 16 trades with an average gain of 42.73% per trade, in an average of just under 38 days per trade. Click here to sign up or find out more. have been rather fortunate to close both the $15.00 and the $16.00 options trade on Silver Wheaton Corporation, with both returning a little over 100% profit.

To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address.

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.

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Reader Comments (29)

I do NOT trade gold stock and their options this way. I trade them much the same way you do. In fact I sometimes piggyback on your posted trades and that has also been very profitable.

Thanks for such a great newsletter.

May 27, 2010 | Unregistered CommenterBC

A month now and an update on my CMI trade.

5/20 – get paid 0.95 / sh to be willing to buy CMI at 67.5 between 5/20 and 5/22. Note, I want to own CMI, it is in the low 70 range and I deposit 67.50 / sh with my broker to cover the possible purchase.

5/22 – CMI falls below 66 so my buy at 67.50 is executed. I now own the stock.

5/27 – Sell the Jul 72.50 call option, collect 3.00.

6/21 – Buy back the Jul calls and sell the Aug calls (called rolling the call), collect 2.00.

After 1 month
- I own the stock at 67.50.
- Have collected and get to keep 5.95
- May be required to sell at 72.50

My plans for the future
- Collect any dividends as they occur.
- As long as the premium remains in CMI (driven by Implied Volatility), I will plan to continue to roll my options each month and collect premium.
- If / when the profit potential become less advantageous, I will either close the position or let the stock be called away.

June 24, 2010 | Unregistered CommenterBC


Thanks for the update and well done. You are obviously a trader who likes to be very involved on a day to day basis. However, it may be a tad too involved for the most of our readers at the moment, but the team who manage SK Options trader may well use the covered Calls strategy in due time. I'll do a write up on it if they do.

June 24, 2010 | Unregistered CommenterGold Prices

> You are obviously a trader who likes to be very involved on a day to day basis.

Not at all. CMI is part of my core "green" holdings. (Why I see them as green is another topic.) I am involved as much as anything else in my core long-time holdings. The covered calls are basically collecting "monthly rent" so to speak. Each month I do look and see how I want to roll to the next month or make some other adjustment.

June 27, 2010 | Unregistered CommenterBC

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