In anticipation of a bounce in the price of gold and a possible short term rally we decided to BUY Yamana Gold Incorporated today for an average price of $14.43 and we are hereby signalling a BUY on AUY for a short term trade.

We originally bought AUY at $9.37 and again increased our position on the 7th December 2007 at a stock price of $12.89. We sold 50% of our holdings at $16.50 on the 31st January 2008 and we have now bought back these shares at $14.43 just miniutes ago.

Our take on the situation now is that Yamana Gold has been oversold and as such presents us with a reasonable buying opportunity. Yamana has traded as high as almost $20.00 but the recent pull back in the price of gold has sent Yamana tumbling by about $6.00 to trade in the region of $14.57.

This company has a market capitalisation of $5.18 billion and a P/E ratio of 46.93, by comparison, one of our favourites, Agnico-Eagle has a P/E ratio of 66.21. Kinross Gold, another favourite, has a lower P/E ratio of 55.03, but does not appear to be as oversold as Yamana, so today’s move has been to increase our exposure to Yamana.

Taking a quick look at the chart we can now see that AUY appears to be oversold and is trading closer to its 200dma than it has done for some time. Keep an eye on the MACD where we want to see the black line on the MACD crossover the red line in an upward motion. This is sometimes referred to as the golden cross and is usually positive for a stock.

Yamana Gold trades on the NYSE under the symbol of AUY and on the Toronto Stock Exchange under the symbol of YRI.

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For the more conservative investors you might want to take a look at Doug Casey’s Big Gold, just click here.