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« 425% Gain in 8 Weeks for SK OptionTrader Subscribers | Main | Recent Gold Hedging Activity – a Warning Sign? »
Sunday
Aug212011

Exciting Times for Gold Bugs as the Eurocrats Dither

Gold prices push higher as once again the ineptitude of our political masters fails to deliver. German Chancellor Angela Merkel and French President Nicolas Sarkozy had scheduled yet another problem solving high level meeting, out of which their followers expected a stroke of economic genius. Instead the two leaders agreed to try for closer economic integration within the euro zone. A result that adds up to sweet nothing.

The turmoil in Europe continues with no end in sight other than the slow disintegration of this 'one size fits all' lunatic ideology. We have warned you about this train wreck that is looking for somewhere to happen for some time now as the Euro struggles to maintain its value. However, the European mess serves only to take the spot light off the US dollar which is also dead in the water despite the occasional dead cat bounce. The race to the bottom continues between currencies with the only beneficiary being hard assets and as we see it gold and silver are top of that league.

Today we will take a quick look at gold and also the HUI, the gold bugs index, of mainly unhedged gold mining companies designed to give investors significant exposure to near term movements in gold prices.

Historically the summer season in the northern hemisphere is a lackluster period for gold. The summer vacation period sees many of the traders away from their desks until around Labor Day, which is the first Monday in September, (5th) and its upon their return that normal business activity resumes. So it will be interesting to see how things pan out when they do return considering that gold and silver have been trekking north for the past two months.

A quick look at the gold chart clearly indicates that gold prices are bucking the seasonal trends this year, having moved up since early July from $1500/oz to $1855.30/oz at the close on Friday. The technical indicators are firmly in the overbought zone suggesting a breather is due, especially when we have the RSI standing at 81.25 which is well above the '70' level that some traders use as a signal to lighten up. However, the fundamentals for gold remain strong and we are on track to hit $2000/oz fairly soon, in fact we could be there in the next few weeks. Golds progress will eventually pause for a rest, but for us it is difficult to see just what would be the catalyst for such a pause, other than exhaustion.

gold chart 22 aug 2011.JPG

Now with gold and silver making wonderful progress one would expect the associated stocks to going gang busters to, not so. They remain in a sleepy mood right now and are not showing much appetite to reflect the progress of the precious metals. As we see it this situation cannot remain as is, because these producers will be generating handsome profits that will captivate the investment community. The question is when will they take off and in our humble opinion the HUI needs to breakout above 625 with some conviction in order to convince investors that the stocks are finally going to outperform gold. For an investor to carry the many risks associated with mining there needs to be a return that is superior to that of gold, otherwise they will buy the metal and ignore the mining sector.

Taking a quick look at the HUI chart we can see that it is standing at 581.29 as of the close on Friday. A couple of attempts have been made to breach the '600' level but they haven't been sustained, thus far. This gives you the time to prepare for a possible breakout and a rally in this sector. You need to identify and list the quality stocks that fit with your investment criteria and have a good chance of meeting your targets in terms of capital growth, etc. Our portfolio is free to view on our site and you are welcome to drop by and take a look for yourself.

HUI Chart 22 aug 2011.JPG

Finally, in an attempt to get leverage on this bull market we have been utilizing options as our preferred vehicle for maximizing returns. This type of trading is not everyone’s cup of tea as movements can be dramatic in either direction. However, when you see your contracts go exponential, it is truly an exhilarating feeling.

As always time is of the essence, so do your due diligence now and get into position by preparing yourself for the difficulties that we are all going to have to face ready or not. Consider a layering in approach and buy on a regular basis to build your position. The oscillations will become violent at times so expect them and hold on tight, making further acquisitions throughout any weakness in this sector. And smile you’re a gold bug!






Regarding www.skoptionstrading.com.

For those subscribers who are too busy to trade their own accounts we are now able to offer an Autotrading program with our SK OptionTrader service, as we are pleased to announce that we have entered into a partnership with GlobalAutoTrading and therefore auto trading is now available for SK OptionTrader signals

Due to number of subscriber requests that we have received, we are pleased to announce that we have entered into a partnership with eOption and therefore autotrading via eOption is now available for SK OptionTrader signals



Our model portfolio is up 389.58% since inception

An annualized return of 119.37%%

Average return per trade of 40.41%

84 closed trades, 81 closed at a profit

Average trade open for 45.33 days

(Note: We closed another profitable trade on Friday and will update the stats shortly.)


sk chart 22 May 2011.JPG



The above progress chart shows our performance when profits are re-invested, however, to see exactly how it is going, please click this link.

So, the question is: Are you going to make the decision to join us today.

Stay on your toes and have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.



To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address. (Winners of the GoldDrivers Stock Picking Competition 2007)

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.

For those readers who are also interested in the nuclear power sector you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.

SK logo 26 May 2011.JPG






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Reader Comments (2)

Please note the change in the email address. Thanks for the information that you offer in your letters - always helpful. Looking at the crossover in the HUI, it appears that a struggle is going on as to which way the trend wants to go. Will have to keep watching the action.

August 22, 2011 | Unregistered CommenterJohn Ell

Good to see the HUI get involved today with a gain of 4% as it closed at 605, maybe this could be the start of a spectacular rally!

August 22, 2011 | Unregistered CommenterGold Prices

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