Iran missile attack and gold options market situation

8 Jan 2020

In our previous reviews on gold purchases, we wrote that a sharp increase in geopolitical risks opens the asset a direct path to growth in the region of $1800. Actually, today's highs above 1610 are a clear confirmation of this.

Recall, investors experienced another panic attack when Iran launched a missile attack on US military bases in Iraq that night. And although according to current information they did not bring over-damage and human casualties, the conflict is clearly in an active phase. It is possible that today the United States will begin to attack one of the 52 objects from Trump's list.

Extremely suspicious is today's crash of a passenger Boeing flew from Tehran.

In general, the increased demand for gold against this background is more than logical. Many doubt that this growth is not a momentary panic reaction of investors. This leads to quite strong counter-movements in gold, which, in our opinion, can and should be used to buy the asset. The main thing in such situations is to distinguish true from false movements. So, the true movement, in our opinion, is the growth of gold, and false movements are intraday descents of $20-30 from daily highs.

Let's try to add arguments to the ones we have already voiced in previous reviews, why the goal in 1800 is quite real.

One of the best indicators of investor sentiment and expectations for the future is the analysis of the options market. It is an option that shows what investors are really afraid of and what they expect.

So in the options GLD (in fact, these are ETFs representing gold), recently the daily trading volumes have doubled. The main activity took place in February options such as Call. Call options are contracts for the purchase of gold, that is, they give their owners the right to buy gold at a certain price in the future. A sharp increase in demand for Call options indicates a significant increase in interest in buying gold and expectations of its growth on the part of traders and investors in the future.

As you can see, the demand for gold in explicit and implicit forms not only increased sharply after the Soleimani murder but also continued to grow.

As for the growth prospects after taking 1550, we have already noted that we are talking about the mark of $ 1800. Therefore, the descent of gold is a great opportunity for shopping.