A subscriber who follows gold closely was having second thoughts in the Rick’s Picks trading room Tuesday about bullion’s rally. “Some of the experts say gold hit a high and is going to plummet by Labor Day,” she noted. “You know better,” I replied, “than to let what ‘some of the experts say’ affect your thinking. None of them is any better than his last ten predictions. Meanwhile, I’ve hung out very bullish rally target at $1623 — not just for your benefit, but for mine too. I’ve avoided blowing out my call spreads too early simply by hedging them with high-leverage put spreads that cost me almost nothing and which I don’t mind having go to zero.
Don’t Wait for Bargains
“Waiting for gold to plunge, as it always used to, so that we can scoop up some bargains has not been a winning strategy lately. The experience should have made you ‘feel’ by now that the experts you mentioned are wrong — also, to understand that when gold finally took off, as it clearly has, how it would do so in a way that would trick bulls out of reaping the rewards they have so patiently anticipated for the last eight years. As [another serious gold trader] has repeatedly emphasized in here, this is not the time for bulls to turn skittish.”
Bottom line: The rally in gold is for real. If you hold a long position, it’s okay to trade around it, possibly with covered writes, or even to trade in and out of it. But when occasional shakeouts occur, as they will, consider them buying opportunities — time to reload.