Gold Rises on Tensions in Ukraine, Gaza

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July 21 (Bloomberg) -- Trading Advantage Senior Market Strategist Scott Bauer and Bloomberg’s Kenneth Hoffman discuss the price of gold on “In The Loop.” (Source: Bloomberg)

Sierra that means bloomberg television is on the markets.

You will be jealous because it's time for futures and focus.

Our topic is gold futures.

They are trading higher this morning after the precious metal suffered its first weekly loss in seven weeks.

Kevin hoffman and scott bauer with may.

Last week was a crazy newsweek.

A commercial jetliner were shut out of the sky and israel started the ground war in gaza and things are going from bad to worse.

Why on earth did gold fall in that environment?

I think gold is the area you go to when there are bad things going on in the world.

You are right, gold has been stuck around $1300 per ounce for months and months.

There are political actions that take it up and all of a sudden, it starts to fall below.

One thing traders look at is the premium.

How much do they have to pay for gold in their country versus the cme.

On the bear case, there is china.

Its premium is zero right now and it's usually five dollars or $10. that's a little bearish.

On the positive side is india, they aren't -- they're the premiums are declining but that is considered good because they had a bit of a bad on gold employ its -- they had a bit of a ban on gold imports.

We are heading into wedding season.

The new president will want to make nice with the indians who like to buy glowed -- gold.

So perhaps it's the chinese premium dimensions that is putting pressure on the gold price.

With that in mind, how are you trading gold now?

There is also inherently about a five percent risk premium in the price of gold due to geopolitical tensions.

What's going on in the mideast and ukraine is horrible.

All the fundamentals actually point lower.

I would be short at the 1320 level.

I would look to buy that back at $1300. fundamentals are pointing lower and we have these tensions which is wrapping up the price.

-- which is propping up the price.

Everyone wants to see this go lower and i think that's where the pressure is.

Put your trade in layman's terms -- scott is telling -- the selling gold futures for 1320 dollars now and hopes to buy them back at $1300. if the trade is successful, the total profit per contract is at least $2000. you say five percent of the gold price is risk premium but consider the events last week.

A commercial jetliner shut out of the sky and things are going from bad to worse and a ground war in gaza -- at what point do you change your mind about the risk premium?

If i see this thing trade at 1325 hundred dollars.

You can tell that the pressure really is to the downside.

If there was much more risk or are there were buyers flooding the market place, we could see this thing trading at $1350. the pressure is to the downside and i think that is what is keeping gold around the $1320 level.

Bullish supply-side economics.

Thank you so much to both of you.

We will be "on the markets" again in 30 minutes.

Thanks so much.

I was jealous you got to talk about gold for five minutes.

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