For the last two weeks it appears gold futures are finding support around current levels as a base is being established. Prices have traded in a $50 range within this time frame. I've been advising traders to buy probes that hold around $1530-1540. If you notice looking back to late 2011 prices rallied 17% inside of 2 1/2 months from these exact levels. Past performance is not indicative of future results.
This trade could work for either future traders or options traders. My suggestion for option traders would be to incorporate bull call spreads in August or October contracts. As for targets I think once prices are able to penetrate $1600/ounce we should wander to $1640 first and then $1670 shortly thereafter.
What has impressed me the most of late even in the face of a commodity sell off and leg lower in the equity market and appreciating dollar gold has been able to hold its own. If and when the U.S. dollar corrects from the 5.5% one way appreciation we should see gold's inverse relationship truly play out.
Risk Disclaimer: The opinions contained herein are for general information only and not tailored to any specific investor's needs or investment goals. Any opinions expressed in this article are as of the date indicated. Trading futures, options, and Forex involves substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.