As you may recall we had the August option expiration for the precious metals at The Bucket Shop today.
The call options at the 1100 level and above expired worthlessly according to the preliminary report from today. I have circled those in red below. As you can see from the prior day open interest, a goodly chunk fell by the wayside.
The second chart shows the distribution of volume for both calls and puts for August gold.
As you may have noticed in the warehouse report from yesterday, a rather large chunk of bullion in the JP Morgan warehouse was moved from registered (deliverable) to eligible (in storage not for delivery). This took what I call the ‘claims per ounce' up to the rather high level of 117:1.
This may be just a tease since there is quite a bit of gold laying about, but not deliverable at these prices, so I won't be getting too excited just yet. I might have been more impressed if open interest had soared, or if some gold had actually exited the warehouse, rather than JPM just playing the old switcheroo with about 105,000 ounces of bullion that is still there.
But the gold crowd is hard up for good news, so let's make a big deal about it for a day or two.
I am keying off gold here, since silver seems to be along for the ride. It may well lead the way at some point as I have noted, but not yet.
After the usual price charts I show the current levels of gold and silver bullion in the warehouses.
We may expect a little punch to the holders of new contracts compliment of the expiration, but most of that work in skinning the option players and knocking down the open interest seems to have been done. As a side note, rather than playing at options on the paper prices at the Comex, you might find buying lottery tickets to be about the same odds and more satisfying. At least it will get you out of the house or office.
Also I wanted to add a comment with regard to all these fellows who are saying that interest rates rising can be good for gold. They tend to like to look back at the 1970's, which I remember all too well. Let me remind you that correlation is not causation. The reason rates were rising back then was that inflation had clearly reared its ugly head, and the Fed was grappling with monetary mischief and a gas price shock (with rationing) that had been delivered by the newly formed OPEC.
