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Snooze Button in Gold & Silver


Gold Price Chart

The following comments are attributed to Craig Hemke, who deserves credit for being the master of determining where the price of Gold and Silver will end up on opex expiration day. Opex refers to settling of call and put options at the end of the month. Call options with a strike price that is below the closing price on the day of opex expiration result in a gain for the purchaser and a loss for the writer of the call option, which is typically one of the bullion banks. However, if the call option has a strike price above the closing price, the purchaser gets nothing and the option expires worthless. But the bank that wrote the option gets to keep the premium that was paid by the purchaser of the option.

The same goes for a put option that has a strike price below the closing price at opex expiration. It expires worthless, and the bank collects the premium. If the put strike is greater than the closing price, then the purchaser gets paid, perhaps more than the cost of the premium, and then the bank loses out.

Price of Gold and Silver Today

All of this is to say that the bullion banks that write these call and put options want the price of Gold and Silver to close below where the majority call option strikes are at opex and above where the majority of put strikes are too. Simply put, they want the closing price to end up between the two so that they can make massive profits.

Now we are still three weeks out, and where the majority of put and call strikes end up remains to be seen, but Craig was kind enough to share with me that, currently, the majority of call strikes are at 2000 and the majority of put strikes are 1900. So, absent a major event that has a significant impact on Gold and Silver prices, Gold will go sideways for the rest of the month, finishing somewhere between 1900 to 2000. In Silver, it’s 22-23. These ranges happen to be in line with my own prior public forecasts, for many other reasons. The probability that these ranges play out just went skyward. 

I consider Craig to be the master of forecasting Gold and Silver prices at opex. He has nailed it to the penny in the recent past.

Another reason why I expect these forecasts to become reality is because it also allows the banks to pare their soaring short position ahead of the next rally to the record high of 2089. They can continue to short Gold when it approaches 2000 and cover their shorts the closer it gets to 1900. There will likely be more retail sellers than buyers, enabling the banks to reduce their shorts to a greater extent than any longs they may add, because if Gold goes sideways for the next three weeks, people will simply get fed up and frustrated, then they give up and sell. It’s just human nature, unfortunately.

Simply put, the banks are likely to try to bore us all to death over the next few weeks, trapping Gold between 1900-2000 and 22-23 in Silver. Many analysts will say up or down because sideways is not sexy, but cash is a position until extremes show up. On the positive side, if sideways action is exactly what happens, then traders could clean up by buying low and selling high until the next opex expiration.

Conclusion on Bullion Prices 

Buy low, sell high. What a concept!

Gold Price Chart

Don’t miss a golden opportunity.

Now that you’ve gained a deeper understanding about gold, it’s time to browse our selection of gold bars, coins, or exclusive Sprott Gold wafers.

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About the Author

David Brady has worked for major banks and corporate multinationals in Europe and the U.S. He has close to thirty years of experience managing multi-billion dollar portfolios including foreign currency, cash, bonds, equities, and commodities. David is also a CFA charter holder since 2004.

Using his extensive experience, he developed his own process utilizing multiple tools such as fundamental analysis, inter-market analysis, positioning, Elliott Wave Theory, sentiment, classical technical analysis, and trends. This approach has improved his forecasting capability, especially when they all point in the same direction.

His track record in forecasting Gold and Silver prices since has made him one of the top analysts in the precious metals sector, widely followed on Twitter and a regular contributor to the Sprott Money Blog.

*The author is not affiliated with, endorsed or sponsored by Sprott Money Ltd. The views and opinions expressed in this material are those of the author or guest speaker, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.


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