Take a Position in ABX While Commodities are Down

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This morning I am feeling bullish about commodities, and I want to recommend a trade on gold miner Barrick Gold Corporation (NYSE:ABX).

Many commodity prices have dropped dramatically recently. We’ve watched crude oil fall precipitously since the start of October as output in the U.S. has increased, and lumber prices have also collapsed.

It was just a few weeks ago that Fed Chairman Jerome Powell spoke at The Economic Club of New York on Wednesday and said the following: “Interest rates are still low by historical standards, and they remain just below the broad range of estimates of the level that would be neutral for the economy — that is, neither speeding up nor slowing down growth.”

His statement that interest rates are just below a “neutral” level shows that the Fed may finally be waking up to the reality that there is less inflation than had previously been thought.

It could also mean that the Fed will be less aggressive in raising interest rates next year, which would be a positive for the market. However, I do think the Fed is going to hike rates one more time this year at its meeting later this month.

If it was wise, the Fed would not raise rates this month, but the central bank has a tendency to overdo things in both directions. Said another way, it tends to cut rates and leave them low for too long during bad times, and it tends to raise rates too far and too fast during good times.

I think that’s a mistake and one of the reasons for the declines we’ve seen in the market this quarter.

There is one commodity that I’m interested in on the bullish side, and that is gold, which you can see represented by the SPDR Gold Trust ETF (GLD) below.

Daily Chart of SPDR Gold Trust ETF (GLD) – Chart Source: TradingView

Gold looks like it is getting ready to break to the upside, and if the U.S. dollar falls as I expect it will over the intermediate term, that should give it a nice bullish push as well. A long call is a great way to take advantage of the situation, and for that reason, I’m recommending a trade on ABX.

Buy to open the Barrick Gold Corporation (ABX) Feb 15th (2019) $14 Calls (ABX190215C00014000) at $0.85 or lower.

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