Trade of the Day: High-Yielding Gold Trust Offers 30%-Plus Return Potential

GAMCO Global Gold Ntrl Rsrcs & Incm Trst (GGN) — I recommended this closed-end management investment company twice last year, but it was admittedly too early. GGN fell from a high above $11 this summer to a low just over $6. Yet, the fund continued to make steady monthly income payments. With an $0.84 annual dividend, GGN offers a forward yield of 11.8%.

Since almost 50% of its holdings are in metals and mining stocks and 33% is in energy, it’s not hard to see why GGN did poorly last year. Now, however, mining stocks look revived and many energy stocks may be close to a bottom or have already begun to consolidate.

Given that we are in a period of general market turmoil, at its current price, GGN could be a good investment for high income while taking on relatively modest risk.

After a decline lasting four and a half months, GGN appears to have bottomed in mid-December. Since forming an impressive deep “V” in early January, it completed the bottom by penetrating its long-term bearish resistance line.

GGN is currently attacking the 50-day moving average at $7.28. With momentum high and its MACD in bullish territory, there is a strong technical reason to believe that it will successfully complete the move. A close above that line should enable this closed-end fund to make an almost unopposed three-month run to its 200-day moving average at $9.50.

Buy GGN for an intermediate trade to $9.50, which is 34% above current prices, as well as monthly income payments.

GGN Chart
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