Gold prices make a vertical spread look attractive

Gold prices have come under pressure after better than expected economic data raised U.S. yields creating headwinds for the precious metals market making a vertical options spread look appealing. The decline in riskier Japanese assets is also creating a deleveraging process where investors who are underwater on their Nikkei positions are selling assets such as gold to handle margin calls. Gold volatity remains elevated, allowing investors to benefit from further market volatility.

During the Asian trading session on Thursday the Nikkei declined more than 843 points or 6.4%, pushing the index below the 13000 mark. The decline in Japanese equities along with the move into the yen, pushed gold prices lower generating negative momentum.

Strong U.S. economic data did little to help the precious metal complex. Prior to the U.S. markets opened, the Department of Labor released jobless claims for the week ending June 8, 2013. According to the Bureau of Labor Statistics, Initial jobless claims, declined by 12,000 to 334,000, putting the claims print at a five year low . Economists surveyed had forecast 350,000. The weekly claims data shows that the economy will continue to add jobs at a moderate pace. Continuing unemployment benefit claims for workers who collect for more than a week rose by 2,000 to 2,973,000.

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