Gold prices fell from record highs Thursday, after a surprisingly upbeat jobless claims report. And many technicians are calling for a pullback in the precious metal.
That very well may be happen, but the gold trade is on for the short and the long term.
5 Reasons Gold Prices Will Keep Going Up
1. Currency devaluations will continue as central banks print money to stimulate sagging economies and monetize deficits. This is happening simultaneously in the U.S. dollar, the euro and the yen. And the British pound will take a hit in November after the government announces a new budget and the Bank of England agrees to print money.
2. As currencies are devalued, commodities, including gold, become the bastion of value traders, as they are seen as being immune to devaluation.
3. Gold is the perceived safe haven in times of uncertainty — a Chinese-instigated trade war, geopolitical risk in the Middle East, gridlock in the United States after the midterm elections, and so on.
4. Despite its meteoric rise, gold still sells for less now than it did at its peak 30 years ago when you adjust for inflation.
5. The world’s greatest technician, in my humble opinion, Louise Yamada, does not believe gold will be in a “bubble” until it hits $5,200 an ounce.
A Few Ways to Play Gold
If you have a long-term perspective and want to avoid volatility, buy gold ETF, SPDR Gold Trust (NYSE: GLD).
If you have a shorter-term view and are more active, buy the ETF and also sell GLD calls, generating cash to buy more shares, hedge your portfolio, and subscribe to my Short Side Trader newsletter if you want help profiting on the short side of the market. You can also simply buy short- or long-term calls on GLD.
Another approach is to buy mining stocks. One of the largest that is also exposed to copper is Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX). It’s quite volatile, the chart looks great, and it pulled back Thursday.
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