SPDR Gold Trust (ETF): Gold Prices Have Receded, Time to Profit

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Gold lovers take note: a quality setup is beckoning. While silver has stubbornly stayed aloft, denying spectators any kind of low-risk entry, gold has engaged in no such trickery.

SPDR Gold Shares: Gold Prices Have Receded, Time to ProfitThe exchange-traded fund SPDR Gold Trust (ETF) (NYSEARCA:GLD) has quietly pulled back this week, providing yellow metal collectors with the best setup since the Brexit. The fact that stocks are in the stratosphere makes GLD’s pattern all the more attractive for traders itching to jump into something right now.

The ongoing bull run in the GLD ETF has lifted moving averages of all stripes. Indeed, the 20-day, 50-day, and 200-day averages are all toeing the bullish line. A brief glance at the weekly chart (not shown) will reveal GLD has even remounted the 200-week moving average for the first time since April 2013.

Well done, gold bulls, well done.

GLD

Source: Optionsanalytix

The post-Brexit pop carried GLD to a new 52-week high on increasing momentum. So says the popular RSI indicator, which notched a new swing high alongside gold.

Buying dips on stocks with increasing momentum is one of the best ways of embracing the odds. While sellers may take prices lower for a day or two yet, the time for a gold play is nigh.

Grab GLD Call Spreads

In sizing up potential plays, one thing becomes apparent: GLD options have become cheap again. And that mean calls and call spreads can be scooped up with just a few shekels. Let’s go with a bull call spread to further reduce the cost while mitigating the effect of time decay over the duration of the trade.

Buy the Oct $126/$131 call vertical for $2 or better. The spread consists of buying to open the Oct $126 call while selling to open the Oct $131 call for a net debit of $2.

The max loss is limited to the initial cost and will be forfeited if GLD sits below $126 at expiration.

The max gain is limited to the distance between strikes minus the net debit, or $3, and will be captured if the gold shares can rise above $131 over the next few months.

At the time of this writing Tyler Craig owned bullish positions on GLD.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/07/gold-prices-recede-buy-gld-calls/.

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