I’ve been thinking that Gold would come back soon for a while. It was getting sold off on US dollar strength and rising rates but the selloff was getting overextended. I was waiting for the market to show me a signal! Higher inflation and higher rates killed Gold, but when everyone taps out and is underwater, that can often be a good time for a bounce.
And the catalyst for a bounce was potentially ahead, the FED rate decision could have been the reason for a change in trend for Gold and that proved to be the case! When the dollar begins to weaken that’s the signal for Gold to potentially bounce! Here’s what happened to my Trade Idea this week!:
UUP is the dollar index. When I looked at it on Monday it had already started pulling back and showed signs of weakness, perhaps profit takers or insiders getting out ahead of the FED meeting?
So whilst UUP had already begun pulling back Gold had not yet done so. Usually these instruments are inversely correlated, and the fact that Gold hadn’t moved yet presented an opportunity!
GLD was forming a base yet GDX had not done so.
If GLD did form a base and move higher i would expect GDX to do the same so this presented a good risk/reward opportunity!
I got long the 24 calls expiring August 19 in GDX, and after the Fed meeting Gold and those options in particular exploded. Here’s what happened:
Over 50% in just a few days ain’t bad! I’ve got the Midas touch don’t miss my next trade Idea click here!
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Image and article originally from ragingbull.com. Read the original article here.