Mover Mike

First, the Gold Bugs Index (HUI) looks like its consolidation is over. A point and figure chart of HUI going back to 2002 shows trading sideways under 150 then a breakout to 250 then trading sideways and then a breakout to 400. HUI has traded sideways since May with major support at 280. Three times HUI has tested the 280 level, three times it bounced off that level. (see chart) Just recently, HUI broke out above 308 and looks like it wants to go higher. (see chart)

Second, Gold, is challenging $600 once again (see Jesse)and a breakout over that level would cross the bearish trendline coming from the high of $712 and would give us an initial goal of $666. I don't want to get ahead of ourselves, but breaking that level puts $800 back on the radar screen.

So now how do we play this scenario?

1. Buy gold coins with the risk that we are wrong and gold breaks $560. The current price of a 1 oz. American Eagle is $620.
2. Buy GLD the ETF that is a stock substitute for the commodity. Current price is about $59 1/2. I would put a stop at $55.
3. Use a gold mutual fund. I use First Eagle SoGen Gold Fund (SGGDX). The advantage of stocks in gold mining companies versus to the ETF GLD is the leverage, the ability to outperform gold.
4. Speculate in a junior gold mining stock. I still use Golden Star (GSS). Use any that you like. Not only will you get leverage, but since many have underperformed GLD and HUI, there will be a catch up. For example, GSS is down 10% for the year HUI is up 3.8% for the year and GLD is up 7.76% for the year. At some point they will all be up the same amount. If GLD goes to +20%, then GSS will go to +20%, but from a -10% level.

Why should you believe me? You shouldn't! I am not be accountable to you and will not tell you when to reverse the trade. Go do your own homework, exercise risk control and if you want to have Gold as part of a diversified portfolio, pick the means that best fits your risk strategy or tolerance.

Gold Gold Bugs Index HUI SGGDX GSS GLD Mover Mike

Update:

From Bloomberg,

Gold advanced for a ninth session in London, matching its longest rally in 20 years, on signs of increased investor demand because of declines in the dollar.

Gold USD Mover Mike