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As Expected, the Gold Breakout Has ArrivedBy Amber Lee Mason and Brian Hunt, DailyWealth TraderMonday, August 27, 2012 The breakout in gold is here. It's time to be long gold.
Back in 2011, gold enjoyed a big rally. As the European debt crisis grew worse, prices shot from $1,550 an ounce to a high of around $1,900. This big rally was followed by a big decline... one that took gold back down to the $1,550 level.
From May through July, gold held steady around the $1,550 level. It then began trading in a tight price range. In this range, gold's day-to-day volatility fell to its lowest point in over a year.
These periods of tight price ranges and low volatility often precede big price moves...
Last Tuesday, our friend and colleague Jeff Clark told Growth Stock Wire readers:
That "decision-point" arrived the next day...
Wednesday's comments from the Federal Reserve led the market to think more financial stimulus is on the way. That resulted in a selloff in the dollar and a rally for gold.
The metal shot out of its trading range. Take a look...
.gif) Over the very short term (two to 10 days), gold is likely to pull back near its breakout level. Markets just like to frustrate traders before moving substantially higher. So if you're already long gold, you can expect to give back some of your gains over the next week or so.
But the longer-term picture is clear. Gold has good fundamental reasons to move higher. And it has registered an important price breakout.
You can trade this rally with a gold fund like SPDR Gold Shares (GLD) or Swiss Gold Shares (SGOL)... or with a quality gold miner.
As our colleague Steve Sjuggerud pointed out in a recent DailyWealth essay, gold stocks are incredibly cheap right now... and could rally triple digits over the next year. Names to consider here are Goldcorp (GG), Barrick (ABX), or Yamana (AUY).
Whatever method you choose, make sure you're on the right side of the market. Right now, that side is long.
Good trading,
Amber Lee Mason and Brian Hunt
Further Reading:
It looks like Jeff Clark nailed the recent move in gold. Less than a week after telling readers gold was "on the verge of an explosive move" higher, the metal is already up 3%. Read more here: A New Gold Rally Could Be Just Days Away.
The breakout in gold is a big plus for gold miners. But Matt Badiali warned about a potential pitfall in one corner of the sector. Before you invest, read his advice here: If You Own a Small Gold Stock, Read This.
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