NEW YORK (Fabian Capital Management) -- When the SPDR Gold Shares (GLD) famously broke below its prior level of support at $130 back in June, it was widely believed that the yellow metal would forever perish into the abyss.The breakdown below that key baseline seemed to vastly separate the gold bugs from the gold haters, with the level of contempt for the price slide vastly skewing the consensus to the negative. Many market pundits were calling for GLD to fall to $100 or lower, with the bulls seemingly nowhere in sight. Never one to run with the crowd, I suggested last month that investors who were considering an allocation to this sector start to leg into some small positions to take advantage of the depressed prices. One of the indications that at least a short-term bottom was near was the overwhelmingly negative headlines that permeated the media spotlight. In my experience, markets typically turn when the news is most bearish because there is no one left to sell.
If you use the June low as the new floor, then you can start to establish new positions on any backfill in the price action. That low can also be used as a stop-loss point for those who have put money to work in GLD. A risk management approach should be a key component of any trading strategy, but especially one in this erratic environment. While gold miners may ultimately represent the biggest upside potential in this sector, I am still avoiding them based on their inherent volatility. I think that accessing the price of gold bullion through GLD represents the easiest method of participation for the average investor. The benefit of this ETF is that it is large, liquid, and easy to understand. In addition, when you use GLD you don't have to worry about purchasing, storing and protecting physical gold, which can be a challenge. At the time of publication the author had no position in any of the stocks mentioned. Follow @fabiancapital This article was written by an independent contributor, separate from TheStreet's regular news coverage.