If oil drops because of MENA stability, it will ease inflationary pressure being caused by high energy and food prices. In addition, President Obama is leaning toward the right in his plan for deficit reduction, which should bring stability to the U.S. debt spiral and thereby help the dollar. Further, many expect Bernanke will soon wind down QE2 and the next rate move will be a hike.
All of these things are bad for gold. Markets are forward looking and sooner or later these catalysts will serve to burst the gold bubble. We are initiating a 2% allocation of GLD January 2013 $150 puts.
With this position we are starting with a relatively small position and will add to it as it produces gains. Timing commodities is a delicate procedure that is more about momentum than it is about fundamentals. No matter how many misses we encounter, we are confident that the hit will be worth it. With gold at $1,455 on April 13th it is time to try this trade again.
Disclosure: I am short GLD.