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The trade war has now started to morph into somewhat of a currency war. China has been heavily devaluing its currency, the yuan, against the U.S. dollar to try to offset the tariffs that have been levied against the country. That makes China’s exports more attractive to buyers, but a weaker yuan is also causing problems with inflation.
While the yuan has been weakening, the U.S. dollar has been strengthening, and that’s put a lot of pressure on gold and other commodities recently. Copper, which some say is a leading indicator for the market, has fallen dramatically, so that’s one bearish sign I’ll be watching.
And with the downtrend we’re seeing in gold, I think we’re going to see it touch the $1,200 per ounce level soon and maybe even drop below that level. The U.S. dollar index (DXY) has now breached resistance at the 94 level and is trading above 95 going into today’s session. A stronger U.S. dollar should actually benefit the small-cap stocks, especially the banks, but it has not been a good thing for precious metals.
And, naturally, it’s not a good thing for precious-metal miners, either. So, today I’m recommending a bearish play on VanEck Vectors Gold Miners ETF (NYSEARCA:GDX):
Buy to open the GDX Sep 21 Puts (GDX180921P00021000) at $0.60 or lower.
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InvestorPlace advisor Ken Trester brings you Power Options Weekly, which delivers 5 new options trades and his latest trading advice to you each Friday. Trester has been trading options since the first exchanges opened in 1973 with a winning streak that goes back to 1984 with money-doubling average annual profits since 1990.