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Gold rallied on Friday, drawing on a well-spring of European optimism to lift itself higher. The dollar index was also weaker. The afore-mentioned optimism is contingent on a productive G20 meeting early November, but member states have all ready started to hammer out the details. The ESFS has also been approved for additional funding by the EU. While it is still a little early to rate the overall efficacy of the new plan, the early response has been positive. We are curious to see how current expectations will carry over to next week.

Directional Commentary:

Options: Options temperament was essentially unchanged on Friday. Volatility contracted, and calls were offered cheaper across the term structure. While the call selling is not being accompanied by put buying, options sentiment is still somewhat bearish. Even if the market rallies, it is likely be orderly and volatility is likely to underperform. We expect volatility will be bid again during a sell-off. Conclusion: Somewhat Bearish

Technical: December gold drifted higher on Friday, but still fell short of the weekly high on Wednesday. Yesterday we noted the formation of an ascending wedge, a bearish continuation pattern, and gold remains between the two trend lines...READ MORE