As gold has traded in a very tight range near the $1350 level this week, there are a number of noteworthy factors that should be considered. 

Technically, the clear rangebound trading from obvious selling at $1370 and sparse trading below $1320 lows since the December/end of year run up appears to form a point where this will not continue.  There has been some discussion on our desk and with clients who have traded gold for decades that the seller may be China.  Should the market break through this level there is little technical history or resistance available for analysis going years back.

Also, worthy of note are the multi-year highs in oil and strength of commodities and commodity indices altogether, especially aided by recent (temporarily subsided) geopolitical tensions, measures of inflation and a rising rate environment.

While a reversion to the mean and lower end of this range is certainly possible and tradable, equal consideration should be given to a breakout of the levels pictured below.

While there are a number of ways to trade this market, several options strategies and combinations of futures and options could be appropriate.

Gold Jun ’18 Daily Chart

Gold Jun '18 Daily Chart

Michael O'Donnell

Mike started his career in the markets on the floor of the Chicago Board of Trade as a trade checker for a local market maker in the Dow Futures pit. This led to interning with an independent introducing broker and going on to work with a number of market participants including: speculating clients, hedge clients, introducing brokers, futures commission merchants, commodity trading advisors, proprietary traders, trading educators, system creators, and a number of international financial market participants.