If you are a gold bug, the last three months has not been fun. You have watched stocks rise to multi-year highs, while gold has fallen roughly 4.6 percent.
In February alone, gold is off 20 points, but now we are at least seeing some bullish bets being placed.
Wednesday morning, we saw an institutional trade in the Gold ETF in which a trader bought 9,517 GLD May 172-strike calls while selling the May 188-strike calls. The trader paid $.65 for this trade, and it will profit if GLD trades above $172.65 by May expiration. The trader also allowed plenty of room for the stock to run—the position is not called away until up at $188.
What's most interesting about the trade is that the trader is not really outlaying a whole lot of cash to enter into the trade. In addition, notice that the trader is not willing to be long GLD until it nears an all-time high, which for the record is $174.07 per share.
When you see traders buy cheap calls or call spreads, it has been my experience that a move higher is going to happen relatively soon or not at all. Indeed, this trader is seeking a near-term rally that potentially ends what has been a bear market for gold.
So do I agree that gold is headed higher in the next 30 to 60 days? The answer is simple: No!