Despite being one of the Three Kings of Commodities, gold isn’t showing me much on is long-term continuous monthly chart. The February contract is stuck in the same major (long-term) sideways trend marked by covering trendlines. It’s interesting to note both the 4-month high of $1,881.90 (November 2021) and 4-month low of $1,680.00 (August 2021) were the results of spikes outside the trendlines before the contract settled down again. At some point the market is going to break out, and given the US dollar is expected to turn bearish while the euro has turned bullish, the more likely move is an upturn in gold.
Theoretical Position: With no clear signal given at the end of November and implied volatility low, one could look at buying a February gold $1,785 strangle.This means buying an at-the-money (roughly) call and put, expecting the market to break out one way or the other. A look at the option quotes puts the total cost of this trade at about $98 (not counting commissions). If betting just on a bullish breakout the $1,785 call is priced at roughly $42.50 (check with your broker). This would put one’s breakeven price at roughly $1,830.
