Our bet is that the Fed will hold interest rates today, with a subsequent rise in the gold prices, which will push the gold mining stocks higher.

Betting is not our particular thing, however, if we were betting people then today we would be looking for a way to take advantage of the FOMC meeting.

Whether you use spread betting, options, and futures or buy a gold mining stock likely to respond to a Fed decision is your choice.

As we are more interested in investment than straight out gambling we would shy away from betting as such. However, investment is a bit of a gamble anyway so we thought that we would take a quick look at it.

It’s a punt but we think that the rates will remain unchanged, even if they go up the market commentators will probably say that this is the last rise for some time so it is still positive for gold.

If you want the leverage that derivatives can offer along with the excitement and all that sweating, then that’s up to you. Being a little conservative in our thinking we would tend to opt for buying a mining stock at the opening today, say Agnico Eagle (or one of your favourites) and hold it for a day or so to allow the rate news to hit the media. With ‘in and out’ costs being comparatively cheap it won’t take much of a rise in gold to move Agnico and cover your costs. So, if you but 1000 shares in the stock and get a $0.50 rise, then you have made $500.0 less commission. If the stock goes up $1.0, then you have made a $1000.0.

Agnico closed at $37.20 yesterday I will report back tomorrow on how the bet progressed.

Don’t go crazy with this sort of move, only put down what you can afford to lose.

The downside is that we are wrong and gold falls taking Agnico with it. As we are accumulating this stock it is not a problem for us to hold it, but we will have lost the bet, technically speaking.

Good luck!

08 August 2006