The gold prices have plummeted to the recent lows of 1122.51 levels but shows a deceptive bounce to the current 1142.46 levels. Isn’t 61.8% fibos retracement enough to assert major downtrend continuation?
This week that the government of India is poised to cut taxes on gold.
The government mentions there is seeking to drop gold import taxes to 6%, a major reduction from the present 10% import tax.
The lower taxes are exclusively to restraint precious metal smuggling.
Analysts reckon the price of gold may be bolstered if this policy is implemented.
While delta risk reversals substantiate these figures with downside risk sentiments
Additionally, we foresee more downside risks for bullion as more Fed hikes in 2017 are also very much on cards. The underlying spot gold price is sensitive to moves in U.S. rates, as a rise would lift the opportunity cost of holding non-yielding assets such as bullion.
Hedging Strategy: Option strips (XAUUSD)
Go long in 2 lots of 2m ATM -0.49 delta puts, while long in 1 lot of 2w +0.51 delta call, See that payoff function the strategy likely to derive positive cashflows regardless of swings but more potential from 2 puts are more than 1 call.
The risk is Limited to the price paid to buy the options.
The reward is Unlimited till the expiry of the option.
Please note that the trader can still make money even if he was wrong – but the spot FX has to move in the opposite direction really fast. The 1 call bought has to beat the cost of buying all the options and still bring in some profits.


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