Gold’s Next Big Move: Boom or Bust?

“This year [2013] will be the third consecutive year of losses for gold mining stocks. But once year-end tax loss selling is over, we’re anticipating a bounce in beaten down gold miners in January.

“It remains to be seen whether this bounce will become a bigger trend change for GDX from down to up, but it’s nevertheless a short-term profit opportunity. We’re buying the Market Vectors Gold Miners ETF (GDX) at $21 and our tandem options trade is to buy the GDX JAN 2013 20 call options (GDX140124C00020000) at around $140,” said ETFguide’s Weekly ETF Picks from Dec. 26.

Since our 12/26 gold miners buy alert, we booked a blended two-week gain of 27% on our tandem GDX options trade, and we’re still long GDX shares.

As readers familiar with ETFguide’s research know, last year we were consistently bearish on gold and other precious metals along with mining stocks. In fact, our largest ETF gainer last year was our 2/14/13 time-stamped alert to buy GDX JUN 2013, 40 put options at $190 per contract.

As we expected, GDX crashed. In our 5/15/13 alert, we exited the trade with a 525% gain, selling our remaining position at $1,200 per contract.

This time around, the smart gold trade has been to do the exact opposite of the crowd. When they’re selling, you should be buying.  

Although gold bullishness has certainly picked up, it isn’t at extreme levels. And that’s good. It means the 2014 rally in gold and gold equities may have some legs, even if it has no brains.

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Ron DeLegge is Editor of the ETF Profit Strategy Newsletter which uses technical and fundamental analysis along with market history and common sense to keep advisors on the right side of the market.  In 2013, 70% of ETFguide’s weekly ETF picks were winners.