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« The Federal Reserve: The Greatest Scam In History? (Revisited) | Main | The USD: Can it continue to rally? »
Thursday
Oct022008

Agnico-Eagle Mines Call Options: Re-visited!

agnico call option chart 03oct08

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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Reader Comments (4)

Gold Miners like Barrick,Yamana,Newmont produce physical gold which is in very short supply.Gold bars,coins etc are at a premium.The futures mkt is being held down to camouflage the slow demise of the dollar .Fundamentals always win through eventually and that is why these companies will see a very strong rally when Gold advances
past the 1000 dollar level again.Just be patient and ride out the storm however painful it is for most of us.Just remember the US has to find the money from somewhere and
i bet those printing presses are hard at work!!

October 3, 2008 | Unregistered CommenterRich

So why do you think the xau has been so utterly destroyed, when the metal has held up pretty well? Seems to be an historic divergence...clearly the longterm favors ongoing major increases in the price of gold, and eventually the broader commodity market will emerge from what is not all that unusual, a major correction 6-7 years into a major bull market. But, since most of us have been schooled to buy the mining stocks, not the metal, I am growing concerned. One could sell all of the stocks and go strictly into ETFs, but historically one would not do as well with that strategy. What is your thinking? By the way, while I have to by law be in mutual funds for our 403b, I own only the "best" xau stocks individually (AEM, AUY, ABX, GG, SLW) and they now seem to be the most pummeled...

SRG

October 3, 2008 | Unregistered CommenterSRG

I see your chart for Options in your newsletter. Is there a free site where options charts may be available?

Many thanks for any ideas.....and many, many thanks for your newsletter. I look forward to reading your concise and and insightful thoughts.......

October 3, 2008 | Unregistered CommenterGreg S

Rich,

We bet they are working overtime! Good Comment, Thanks.

SRG,

It has been destroyed due to hedge fund dumping due to margin calls and tighter credit conditions.
We also hold some of those stocks, with the exception of GG and ABX, and the reason we think they are the "best" is because they offer the most leverage to the gold prices. Sure they may be falling significantly now, reflectin the fall in gold prices, but when gold starts rising again, these stocks will rise the fastest and the highest in our opinion.
However we do recognise the poor performance of gold stocks in general, and our currently revising our strategy on how we play gold in the future.

Greg S,

The chart is from www.etrade.com and you can get basic options charts there for free, although if you have an etrade account (as we do) you have access to more complex charting toold.

October 3, 2008 | Unregistered CommenterGold Prices

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