As political uncertainty continues to spread like bears in the crypto market, Gold is becoming the beneficiary of the bad news bears. Even as the dollar continues to strengthen, and into the face of yet another interest rate hike, gold is building up momentum. Next stop is $1300.
Watching gold move is like cheering for a snail to cross the road. It is slow and painful. However like a freight train, once momentum builds it is hard to stop. Our original target last year was 1450 by the end of summer. Quite simply our weather forecast was wrong, and in lieu of sunshine we got rain. Hey it happens but this did not discourage us, just provided more time and better prices to accumulate. I am still in silver camp here, but never turn down a good gold deal when they come about.
The 1250 area is a critical area to push through for gold. Not only is this near a resistance level, but is a psychological one as well. The current pullback is likely a consolidation in a broader move where we have lowered our expectations to $1300 over the next couple months. It is not about being right or wrong, it is about positioning yourself when the bull market returns, and for metals it may be closer than we think.
Gold has a series of higher lows and higher highs having pushed through the minor resistance level at 1216 and are knocking on the door of 1250. We expect to see some consolidation here, and a slight pullback to retest the 1236 support/resistance level, but gold is forming the type of structure we like to see raising the probability this is an initial move in a broader bullish swing. Keep in mind gold can pullback to 1200 and the bullish structure would remain in tact.
One way we trade gold is through GDX or the gold miners ETF. Currently we are long GDX and will look for an opportunity to add to our position using our options strategy. Either we are assigned the shares at a better price or we keep the premium reducing our dollar per share cost on the shares we own. In the near term we are looking for GDX to hit 22.25 around the same time gold hits $1300. From there GDX moves faster than gold as margins widen for miners.
Long term we are looking to add to our GDX position as a rally in gold back towards it’s previous high will likely take GDX with it. This is a 3 fold move from here, and if gold can push new ATH’s over the next few years GDX is likely to as well.
This is not a get rich quick scheme, this is long term positioning for a potential bull rally in gold. You can accumulate when sentiment is low, or try and catch the move when bullish sentiment returns. I prefer the accumulate when sentiment is low and in the meantime it does not hurt to get paid to accumulate or sell inventory using options.
Disclosure: Long GDX