There is an FOMC meeting today, and rates are widely expected to remain unchanged. Market expectations have also shifted from pricing in multiple rate cuts this year to recognizing that additional hikes are still possible. Higher interest rates are generally a negative for precious metals because gold and silver do not produce income or dividends. When rates rise, investors can earn more attractive yields in cash, bonds, and other interest-bearing assets, which increases the opportunity cost of holding metals. Higher rates also tend to strengthen the U.S. dollar, making precious metals more expensive for foreign buyers and often creating additional selling pressure.
We established a bearish position in SPDR Gold Shares, and the trade has performed well. At this point, it becomes a more difficult decision, as the position could either move sharply against us or continue lower in our favor. With this morning’s gap down, we are choosing to lock in profits. That said, for those seeking additional downside exposure, holding the position longer could still make sense—just with a higher risk/reward profile. We haven’t
Taking profits on our GLD Put Butterfly as follows:
Sell to close: GLD Aug 21st (monthly) 420.00 strike put (ratio of 1)
Buy to close: GLD Aug 21st (monthly) 390.00 strike put (ratio of 2)
Sell to close: GLD Aug 21st (monthly) 360.00 strike put (ratio of 1)
Credit: 5.80
We entered this position at 3.80 debit and exit at 5.80 credit. The result is a profit of +2.00 or +$200.00 per spread traded.