Michael: Hello, everyone. This is Michael Gross of OptionSellers.com, here with head trader of OptionSellers.com, James Cordier. We’re bringing you your monthly Option Sellers Radio Show. This is for the month of July. Today, we’re going to talk about quite a few things. I want to start off with the gold market, because, James, you were featured on CNBC this month talking about gold, taking a little bit less than bullish view on that. Is that still your view on the gold market right now?

James: Well, Michael, as you know, everyone’s bullish gold simply because of 0% interest rates and negative interest rates around the world. The last time that quantitative easing was introduced in the United States, that’s what raised gold from $1,100 up to $1,900. Now, a lot of investors are thinking basically along the same lines. Quantitative easing was supposed to create inflation. Several years ago in the United States, when we went to QE, it didn’t happen. Now, I believe investors are falling maybe into the same trap, thinking inflation’s on the way. Because of negative interest rates, it may not play out that way. As a matter of fact, lower prices for commodities because of a weak global economy, we think, is more likely.

Michael: That’s counter to what a lot of people feel right now because of times of anxiety, we have terrorist attacks again in Paris this month, seems to be a lot of turmoil in the world right now that’s bringing a lot of investor interest into gold. You seem to feel that the inflation argument probably will be what dictates the direction here over the longer term. Is that correct?

James: Michael, eventually it always does. Quite honestly, inflation is the catalyst for gold and silver to go higher. If we have deflation, we just don’t see how it can produce gold prices of $1,600, $1,700, $1,800 an ounce, which a lot of investors are looking forward to. But the fact of the matter is, gold did rally to $1,800 and $1,900 an ounce several years ago. Commodity prices were raging, soybeans were at multi-decade highs, so was copper, so was crude oil, so were many of the foods. We are going into a very weak economic/global state as far as demand for commodities. We have overproduction of everything from steel, to zinc, to iron ore, to copper, and silver. We just don’t see the inflation scenario taking place. Is gold good for hiding out when there are situations going on around the world? I guess it is; however, inflation eventually dictates the price, and we’re seeing probably deflation at the end of this year.

Michael: Well James, you make some good points, and maybe they’re listening to you because since your appearance on CNBC at the beginning of July, gold has had a pretty good retracement down. I also noticed, and this is something that we mentioned in the article that you did last week, that we have a very big speculative long position in gold futures. It’s on the record that with 50,000 contracts it’s pretty heavy, so oftentimes when you have that heavy speculative yet small speculators pouring into the market, they’re heavy along the market and you have commercials getting short. Sometimes that can be an indication of a trend change.

James: Michael, we think this is one of the most crowded trades ever. Just about practically everyone who’s a gold bug is double down on getting long gold. We have had a decent rally. It rallied nearly $100 an ounce. We’ve come back about $50 real rapidly over the last 2 weeks or so. Basically, the U.S. economy is doing okay. We’re not looking at negative interest rates anytime soon here. We think that the smart money, who probably was buying gold around $1,100 and $1,200, probably feels that they just have too much company right now. We see gold probably retracing into the $1,200’s over the next quarter or so. We think gold is a great market to trade. We would not be stuffing it under our mattresses… not at this price, certainly with commodities headed lower, (continued)