Weekly Update: December 4, 2013

| December 4, 2013

Weekly Update: December 4, 2013


Commodity Watch:

This is another big week for the precious metals markets…

As you’re likely aware, November Nonfarm payrolls are released this Friday.  Consensus estimates are calling for job additions of 180,000.  If the actual result is better than expected, we’ll likely see another hefty selloff for gold.

On the other hand, if the result is much weaker than expected, investors will take it as a sign that Fed Chairman Ben Bernanke will delay tapering until 2014. 

That may bring the bargain hunters out to pick up gold on the cheap…

Heading into Friday’s release, investors are pushing the yellow metal all over the map.  Gold succumbed to a swift selloff on Monday, only to rally dramatically higher in today’s trading session.

At the current price of $1,247, we’re essentially at the same price area where we bought our iShares Comex Gold Trust (IAU) January 2014 $12.00 Puts.

Let’s keep holding these puts through Friday’s release.  Remember, at our buy price of $35 a contract, these puts are a low-risk way to capitalize on a further drop in gold prices.

Here’s an update on the remainder of our open portfolio positions…


Portfolio Recap:

. . . . US Natural Gas Fund (UNG) January 2014 $19 Calls

The NOAA is out with another chilly forecast… 

The 6-10 day outlook shows below normal temperatures for nearly 3/4 of the US.  As a result, the price of natural gas is flirting with the highly important $4.00 mmBtu level in today’s trading session.

We still have plenty of time for these calls so let’s keep holding them.  Bulls will be in control of the natural gas market as long as the temperatures are dropping. 

. . . . US Oil Fund (USO) January 2014 $34.50 Calls

Crude is screaming higher today thanks to bullish EIA supply data.  This morning’s inventory report revealed US storage levels fell by 5.6 million barrels for the week of November 29th.  That’s a much bigger withdrawal than investors were expecting, and therefore bullish for the price of WTI.

And that’s not all…

Investors learned yesterday that a new oil pipeline out of Cushing, OK will be operational on January 3rd, 2014. 

As you may know, WTI crude prices are largely based on how much supply is in the Cushing storage hub.  Since the pipeline is expected to transport 700,000 barrels a day away from Cushing, the news adds another bullish dimension to the crude market.

We’re sitting on a gain of 37% in this trade as I write.  Let’s keep holding these USO calls for higher crude prices.


Category: Commodity Trading