During this period of carnage for all market sectors the precious metals sector has been hit very hard indeed battering our portfolios but also presenting us with opportunities. For instance, as the above chart shows the very same Call Options, JAN09, strike price $60.00, that we bought for $5.50 and sold for $11.00 are now trading at $4.20.
Should we dive back in and buy them now you ask? We don’t think so, however the time is very close. Firstly, this turmoil that exists in the financial sector looks like getting a bail out of some description and that should help the mainstream equities market stabilize, if not experience a little jump to higher ground. The US Dollar may also benefit from the illusion that all is well on Wall Street which could send gold lower. Also note that the dollar has breached the ‘80’ level on the US dollar index to close at 80.55, something that we watch constantly. We could argue that a double top is forming but we would rather wait and watch it unfold because if it stays significantly above ‘80’ then ‘80’ becomes a support level for the dollar.
We anticipate that the effect of this bail out will be short lived but could provide us with a window of opportunity to make some bargain basement purchases, so stay awake as history is being made right in front of us.
Got any comments? Then fire them in!
Agnico-Eagle Mines Limited trades on the NYSE under the ticker symbol of AEM and on the Toronto Stock Exchange under the symbol of AEM.TO.
Trading decisions belong entirely to you as your circumstances are different from ours and we trade to suit our investment criteria and cash position.
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