Altimus Capital’s Chris Gersch: Shorting Oil, Long Gold Futures

Monday, June 16, Altimus Capital’s Portfolio Manager Chris Gersch and Gregory Bender discussed the price of oil on Bloomberg TV’s program “In The Loop.” They also examined the situation with gold, and options amongst commodities. Let’s take a look at some of the most interesting points of this dialogue:

Oil is flat for the day, and one of the main questions is: “Geopolitical concerns in the Middle East, is it something that lasts for a couple of weeks and goes away (at least for the market impact)?”

Gold Bullion

“On the one hand, you had a market driven by technicals, that looks like it was poised for this. We had the 50 cross over the 200-day moving average back in April, a series of higher lows broke through 105, which was clear resistance on high-volume. On the other hand, we are seeing a surge in options volumes, on the U.S.O ETF that tracks WTI. That begs the question: is that speculators entering the market? Either short-covering or fading the move to your point. We are going to be back in this range once this blows over,” Mr. Bender answered.

However, Mr. Gersch added, although the oil price went up through $105 for the WTI, it still may fall back.

“I think 105 was a key pivot point. The fact that we are not getting any momentum now (the socioeconomic pressures are continuing to mount in Iraq) for us, traders, it means that we might then pull back below that support and it’s going to become, again, an area of resistance.”

Regarding other commodities, Mr. Gersch continued:

“Gold has not fallen through the way the price in oil has. So, what traders are doing is longing gold volatility and shorting the oil contract, if it doesn’t pick up on some of the momentum on that 4% move last week.”

Altimus Capital’s Portfolio Manager was also asked if shorting oil contracts is a good idea, and at what point would it be optimal to do so.

“I believe the 110 level is that key point that you just hit on. I think that you will have a lot of people producing, the OPEC coming in, pushing the pressure on production at that 110 level […] If we do fall back below that 105 handle, I think a lot of traders are going to go back into possibly seeing the 100 handle, before we se 110.  So, 100 in oil, before seeing the 110, this is what a lot of traders are saying,” he replied.

Watch the full video below:

Disclosure: Javier Hasse holds no interest in any commodities mentioned

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