The gold sector is the most emotional I have seen it in years, with the bulls and bears at each others throats. So I can understand why some traders may be confused.
I think the bears are dead wrong and most of the bulls are completely missing the point as to why gold is rallying in the first place. This is precisely why trading gold will stay a pros game -- so let me guide you to profits in this sector.
I became extremely bullish on gold in August, and if you've been following my updates on OptionsZone -- Don't Miss the Bull Run in Gold and 3 Golden Option Opportunities -- I hope you enjoyed cashing in on the 100%-plus winners I recommended.
Currently trading around $48, I think GDX is going to make a run for the old high resistance at $56.87 in the next couple of months. So we're going to play this move with the GDX Jan 55 Calls (GDDAC) and the GDX March 60 Calls (GDDCH).
While I think GDX will hit these levels before January, I like to give myself time for things to play out when trading options, and I always go for the low-risk/high-reward trades.
Buy the GDX Jan 55 Calls (GDDAC). Currently trading around $2.55, these calls should trade up to about $7 to $9, leaving plenty of room for profits, especially if you scale into the position on dips.
Considering this option has a volatility rating of 45.25, these calls should trade as low as $1.25 to $1.80 on the biggest pullback days. So if you time your entry and scale into the position, then you stand to make big profits!
Buy the GDX March 60 Calls (GDDCH). Currently trading around $2.55, these calls should trade up to about $9 to $11. This option has a volatility rating of 45.15, and these calls should trade as low as $1.25 to $1.80 on the biggest pullback days, so you should also try to scale into this position.
To be clear, I am not one of those gold bugs. I am what you would call a "greed bug" -- I am just here for the ride and ready to move on to the next hottest sector in a year or so.
Gold Rising in Every Currency Sparks 'Global Phenomenon'
Gold gone up every single year for nine years straight and counting. None of the major indices or any other market segment I know of can make that claim, and that includes oil and every other commodity in the energy sector.
When you hear the media propaganda that the only reason gold is going up is because the U.S. dollar is dropping, then ask yourself why is it going up in every currency? After all, every currency in the world isn't in freefall, and gold is breaking out in nearly every major currency in a parabolic fashion.
GOLD Breaking Out in British Pound
GOLD Breaking Out in Euro
Some of you are no doubt still sitting around questing why gold is making new highs, yet the dollar isn't making new lows. In fact, gold is even moving up even when the dollar has a good day. This week, the dollar rose and gold still managed to rally to new all-time highs.
When you make a currency bet, you exchange one currency relative to another. Often, the two currencies will have different interest rates. To "hold positive carry," all you have to do is exchange a currency with a low interest rate for a currency with a high interest rate. So that the "why."
Still confused? Who cares!
Folks, gold is in a parabolic rally worldwide, and this global phenomenon is your once-in-a-lifetime chance to cash in on this huge bull market!
If prices are going up, they are going up, and that is that. It's time to stop trying to figure it out, accept that it is happening and act accordingly. If you hesitate you may just miss the gold train.
Technicals Support the Gold Rally
If you still need more convincing, consider the technicals:
-Gold soundly rejected the $983 area a couple of times, and did so with vigor. Those expecting a correction will have to live with the shallow pullback we were lucky to receive.
-Gold has now closed over $1,000 numerous times, and is likely going to stay above this level.
-The sideways move from $983 to $1,025 during the month of September now looks like a sizeable base from which gold can be propelled to much higher price levels.
-Many gaps prior to this week's breakout have been filled and/or serve as important support levels that will hold for many weeks and likely months to come.
-September's monthly close was the first one above $1,000.
-In overnight trade on Oct. 7, we finally crossed $1,050, a new all-time high.
-These types of milestone developments do not go unnoticed. From a technical standpoint gold looks like it will continue to skyrocket to new all-time highs.
How You Play Gold So You Aren't Tardy to the Party!
So, are you ready for another winner in the gold sector? Well then take a look at the Market Vectors Gold Miners ETF (GDX).
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