This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
$1 buys you full access to ALL of TheStreet's Subscription Services! Learn More

Time to Buy Gold?

NEW YORK ( TheStreet) -- Gold futures have been trending lower in recent weeks after failing to breach the heavy band of overhead resistance from $1,790 to $1,800. Gold put in a swing low of $1,698.70 during Wednesday's session.

Now, I do not think that fundamentally anything has changed. What we have seen recently is a general period of "risk-off" trade which has affected everything from the equities markets to gold to grains.

And as I have stated, this should come as no surprise. After all, we are looking at a very tight presidential election, we have the "fiscal cliff" issue to deal with and earnings have largely been a disappointment at this point.

So why would one buy gold here? Well, for a few reasons I think.

Although gold has been trending down on the daily chart, it Is still in a solid uptrend on the weekly as well as monthly timeframes. Therefore, the bigger picture is still pointing to higher prices.

On the daily chart, gold has retraced approximately 50% of the breakout move from $1,590.40 to $1,798.80. The "half-back" trade is a common setup, and if the market can hold this level then some upside in the coming days is likely.

The market remains above the 100-day exponential moving average on the daily timeframe.

At some point, I feel that shorts will look to cover -- possibly starting Friday -- and prices will benefit from a good old-fashioned short covering rally. Besides, with everything going on the world right now who wants to go into the weekend short?

The market has reached a technically oversold condition.

Money printing and stimulus measures by global central banks I feel are likely to keep a floor under gold prices as faith in fiat continues to dwindle. Time will tell if the longer-term trends turn bearish in gold or not, but I think at a minimum some short-term upside is likely.

So, how does one take advantage of this upside should it materialize? Well there are numerous ways. I think one could look to sell deep out-of-the-money puts or put spreads here. Something along the lines of the January $1590 puts looks attractive. Feel free to contact me for option setups or help in structuring a position.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,814.94 -2.96 -0.02%
S&P 500 2,067.03 -2.38 -0.12%
NASDAQ 4,758.2520 +3.36 0.07%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs