Gold Stocks: Add To Your Bullish Position

| March 14, 2014 | 0 Comments

mine helmetsMining stocks are finally getting the attention they deserve…

In fact, gold stocks surged to a new 2014 high in yesterday’s trading session.  And that’s in spite of the hefty downturn in the broad market indexes.  As you’re likely aware, the Dow sank 230 points as investors fretted over the Ukraine situation.

Take a look…

Market Vectors Gold Miners

As you can see, the Market Vectors Gold Miners (GDX) surpassed the 200-day moving average (red line) in early February.  And after a few weeks of tight, range-bound trading (green lines), the mining ETF is breaking to the upside.

Remember, I alerted you to start nibbling on the long side of GDX here.  I also suggested how you manage the trade here

And now that miners are gaining even more bullish momentum, it’s time to add to your bullish position.

Let me explain why…

The tight trading range we saw in miners over the past few weeks was a major decision point for investors.  After all, gold was bumping up against important technical resistance at $1,350 an ounce.  There was a very real possibility of a downturn in both the miners and the metal.

But now, with gold breaking upwards towards $1,400, investors are realizing the rally in miners has room to run.  In other words, sentiment towards miners is getting better the higher they trade.

And that’s not all…

Two worrisome catalysts increase the likelihood of gold rising even further in coming months. 

First, the Ukrainian situation is getting messier by the day.  If things continue on their current course, we could see a dramatic escalation in the region.  As you may know, gold is one of the go-to assets in times of geopolitical crisis.  It’s not out of the realm of possibility to see the metal rise to $1,450 should the showdown with Russia turn ugly.

And secondly, worries over the strength of the Chinese economy are growing by the day. 

As I mentioned in a recent article, copper sank to a multi-year low under $3 a pound on word of a Chinese corporate bond default.  If more corporate defaults occur, it’s a red flag that China’s economy and banking system aren’t as stable as previously thought.

The takeaway?

The bullish run for gold miners is far from over.  Now, that’s not to say we won’t see plenty of volatility.  In fact, you can count on a few viscous downdrafts in miners over the course of the next few months.  But when it happens, I suggest you add to your long position in GDX.

 Until Next Time,

Justin Bennett

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Category: Gold

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.