buy gold stocks now?

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Post on 16-Aug-2015

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Over the past year I’ve heard plenty of theories from mining stock analysts as to

why investors should load up on gold stocks.

“… they’re cheap…”

Over the past few weeks the mining space succumbed to a viscous downturn. In fact, the Market Vectors Gold Miners ETF$GDX, a great representation of overall gold stock performance, has declined 23% over the past month.

As you can see, investors have been dumping$GDX without hesitation. Once multi-month technical support in the $19 area gave way, there was no stopping the

ensuing downturn.

You see, despite trading at it cheapest price in nearly 7 years, $GDXis likely heading even lower over the next few

months.

Why?

For starters, the price of thecommodity gold miners produce is falling off a cliff.

With gold breaking below important long-term technical support the past few

weeks, the door is now open for additional losses. In fact, I wouldn’t be

one bit surprised to see the yellow metal trading at $1,000 an ounce before this

year is done.

Clearly, the tide has turned sharply in favor of gold market bears in recent

weeks. The metal is down 6.75% in the past month, which puts it16% lower over

the past year.

But here’s the deal…

I wouldn’t be surprised to see a snap back rally for gold and gold miners in coming

days. Since these markets are drastically oversold from a short-term technical

standpoint, the odds favor some degree of relief rally.

How do you capitalize on this situation?

If you’re quick, you may be able to catch a few points on the looming upturn. You could not only buy the aforementioned

$GDX, but you can also catch some upside with the ETFs listed here.

However,don’t fall in love with your long positions…

Once gold and gold minerswork off their current oversold condition, bears will

likely send these markets to new yearly lows.

Keep in mind, there’s a very important Federal Reserve meeting tomorrow. The

highly anticipated eventshould give investors a better idea of when interest

rates will start creeping higher. As it sits now, the analyst consensus is for a

September rate hike.