This Day On The Street
Continue to site
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

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

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

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
Stocks Under $10

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

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
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $93.64 -0.11%
FB $118.57 0.84%
GOOG $698.21 0.75%
TSLA $241.80 0.43%
YHOO $36.53 -0.19%


Chart of I:DJI
DOW 17,891.16 +117.52 0.66%
S&P 500 2,081.43 +16.13 0.78%
NASDAQ 4,817.5940 +42.2360 0.88%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs