Surging oil (NYMEX:CLV13) on Syrian is raising fears that the global economy could be hurt by this rise in price. Precious metals are soaring but industrial metals are sputtering as traders fear that the global economy won't take well to rising oil prices. Emerging markets are getting a double whammy as falling stock market and currency markets still have traders seeking safe haven and could go into crisis mode because their energy costs are too expensive.
Oil hit what were the bulls’ long term target of $110 a barrel, yet a top in this market may not come until the missiles start to fall in Syria. There may be increased trepidation on the buy side but the wall of worry will continue to build. Volatility is rising.
Bloomberg News reported "Crude oil call options surged as futures rallied on concern that supplies from the Middle East may be disrupted if the U.S. and its allies attack Syria over its use of chemical weapons against civilians. Implied volatility of October calls protecting against a 10% rise in futures prices jumped to 29.39% at 2:15 p.m. from 22.73 yesterday as futures gained the most since May 2. Volatility for puts covering a 10% drop was little changed, climbing to 25.58% from 25.23. ‘Because of the imminent strike and risk to supply, people are trying to hedge their position, buying options in case of worst case scenario or you're just adventurous and want to try and capitalize on a big move in the market,’ said Phil Flynn, senior market analyst at Price Futures Group in Chicago. ‘Vol could go up again tomorrow if they are striking on Thursday.’"
Implied volatility for at-the-money October options, a key gauge of options value, was 24.44% on the New York Mercantile Exchange, up from 21.22% yesterday. Volatility for the nearest-month options is at the highest level since May 1. West Texas Intermediate crude for October delivery increased $3.09 to $109.01 a barrel on the Nymex, after touching $109.32.
The most active options in electronic trading today were October $115 calls, which rose 59 cents to 76 cents at 2:25 p.m. on volume of 6,093 contracts. October $100 puts were the second-most active, dropping 24 cents to 22 cents a barrel on volume of 5,280 lots traded. Calls accounted for 59% of electronic trading volume. In the previous session, bearish bets made up 62% of the 49,647 lots traded. October $96 puts were the most-active options yesterday with 2,508 contracts changing hands as they fell 2 cents to 13 cents a barrel. October $100 puts, the next-most active, declined 1 cent to 46 cents on 2,359 lots. Open interest was highest for December $80 puts, with 40,064 contracts. Next were December $90 puts with 36,184 lots and December $105 calls with 35,347. The exchange distributes real-time data for electronic trading and releases information the next business day on open- outcry volume, where the bulk of options activity occurs.
Gold and silver all of a sudden looks like a safe haven as the rupee gets ripped and the gold haters get a lesson in metals history. Syria is only part of the story as the U.S. may hit the debt ceiling in October and the physical side of the market starts to dry up. Now the reversion back to the bull from bear as speculators get out of what was a record short position below the cost of production is signaling a major potential move. Central banks continue to purchase gold at levels not seen in almost 50 years and for 10 strength quarters in a row. The gold market could surge to a new all-time in coming months as the move reflects eerily the move we made in gold in the 1970s.
As Reported by KITCO News "The U.S. debt ceiling is likely to garner renewed attention in the coming weeks and could re-emerge as a catalyst supporting gold, if it's not already, analysts said." For now, the market is being bolstered by geopolitical tensions in the Middle East while also focused on when the Federal Open Market Committee might start to taper its bond-buying program known as quantitative easing. Gold is sharply higher Tuesday, with analysts reporting safe-haven buying on fears the U.S. could take action against Syria over the latter's alleged use of chemical weapons. Also, soft sales of new homes and durable-goods orders in the last two business days have traders rethinking how aggressively the FOMC may taper QE, lending some support.
The debt ceiling is also starting to creep back onto the radar of traders. The Obama administration said Monday that the U.S. is on pace to exceed its borrowing authority in mid-October. This means potential for a new flashpoint in the long-running fight between Republicans and Democrats on the size and role of government. Republicans are demanding spending cuts, but President Obama has said he will not negotiate on the debt limit.”
Natural Gas Report today as the market is still trying to recover from last bullish number. The trade underestimated the impact of fuels switching back to gas for power generation. That of course is not only a short term story but a long term story as well. Reuters News reported that "Entergy Corp will shut the Vermont Yankee nuclear power plant, citing high costs tied to regulation and competition from cheap natural gas, bringing to an end a long battle with state politicians and environmentalists seeking to close the plant."
"The 40-year-old plant, which generates three-quarters of the state's power, will cease operations by the fourth quarter of next year," Entergy said on Tuesday. Entergy's announcement came just two weeks after a federal appeals court largely sided with the company in its fight to prevent Vermont from shutting down the only nuclear power plant in the state. Opposition to the plant has grown over the years, most recently focusing on a January 2010 disclosure of a leak of radioactive tritium. Still, the U.S. Nuclear Regulatory Commission granted the plant a 20-year operating license in 2011 that would have kept it running until March 2032.”