What’s Up With Gold?
With everything going on in today’s world (ridiculous oil prices, rising food prices, and a nasty looking dollar) one would think that Gold, considered by most as a “safe haven” in times of turmoil, would be doing well. Not. After making a one-year run from $650/ ounce to a little over a $1,000/ ounce in March, Gold is now trading at $870/ ounce.
What’s amazing to learn is that we all know Gold has been a solid investment for years now and rightfully so. You would also expect Gold will eventually challenge the $1,000 mark again. Those are givens. However, from what I’m hearing there are some who expect Gold could trade as high as $1,500-$2,000 within in the next year. Are you serious?
I’m not a big fan of gold-mining companies but there are other ways to trade Gold rather than buying a stock. You can trade gold futures and options on the New York Mercantile Exchange and the Chicago Board of Trade’s eCBOT electronic system. You can buy Gold calls and puts at different strike prices just like options on stocks or the S&P 500.
Gold options trade in 100 ounce contracts. To figure out the cost of an option you take the current price of a contract (let’s say $30.00) and multiply it by 100. So it would cost you $3,000 ($30.00/ oz. x 100 oz.) if you picked a strike price with a premium of $30.
These trading alternatives may or may not be for you but I thought it was interesting to see how Gold has been in a downtrend when other commodities have been booming.
Rick Rouse
Rick@OptionsMentoring.com
Tags: Gold, gold futures