Trade of the Day: SPDR Gold Shares (GLD)

Seek safety in precious metals

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Today I am recommending a bullish trade on the SPDR Gold Shares (NYSE:GLD), an ETF that tracks the price of gold.

The market is definitely in a corrective mode right now and, while this week’s pullback is not as severe as the one we saw at the start of the year, there is a chance that stocks could take another leg to the downside before they are able to stabilize. I mentioned previously that the Fed’s interest rate increases are eventually going to cause deleveraging in the marketplace, and the action this week seems to bear that out.

The Fed has been tightening in response to what it sees as inflationary pressure on the economy, but there is simply not as much inflation as the central bank is saying. In my view, the inflation that there is right now is probably man-made.

I don’t think there is much, if any, real inflation in the economy, but there is a lot of man-made inflation. The trade war with China, rising wages, the booming economy, and the cut off of Iranian oil exports to the U.S. are all major factors.

I do not think the market has made a true bottom just yet, but I do think the selling will calm down as we head into November. It’s not unusual to see market corrections in October, and I’m expecting some additional near-term weakness.

Given the action we’ve seen in the market this week, I am leaning towards the bearish side, but this bullish trade on GLD is actually a reminder that traders should continue to seek safe-haven investments in precious metals during these uncertain times.

Buy to open the SPDR Gold Shares (GLD) Dec 118 Calls (GLD181221C00118000) at $1.55 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.

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