Two Investment Ideas Worth Exploring

I have been 100% bullish on gold and been recommending to my readers for long. Here are two charts I would like you to study for an interesting idea that I had earlier mentioned on this site.

gold.gif The first chart is Gold prices chart. Notice how Gold has been forming base and advancing higher by shaking out the weak traders. Long time investors have been rewarded appropriately. Anything above $955 box will take gold into new territory. As per the futures market, Gold is already showing a break-out above that level. There was some weakness in gold prices yesterday following the announcement of The U.S. Treasury, in a policy reversal, backed an International Monetary Fund plan to sell some of the lender’s $98 billion in gold reserves to help make up for a decline in revenue.

“We have a very credible plan for cost reduction that’s in the process of being implemented” at the IMF, David McCormick, Treasury’s undersecretary for international affairs, told reporters in Washington. “For that reason, Treasury supports limited gold sales.” Read details here.

gdx.gif Here is the 2nd chart. It is GDX, an index made-up of gold miners that includes ABX, AEM, AU and many more. Notice the last high, the box of $54, that was back around Nov 7, 07 when the gold was trading in the range of $820-$840. Since then Gold has shot-up to the $950s, but GDX is yet to top its Nov high. I am sure the cost hasn’t increased that significantly for the producers, but the topline has i.e. fat profit margins. GDX is made-up of stocks and stocks tend to behave according to the general market, and that’s probably the reason it’s not moving to great heights. But I think its time has arrived. So watch-out for the $54 box, it needs to cross and close above that to make any significant move up. Net, idea#1, I am bullish on GDX while hedging the downside. If you are a OPNewsletter subscriber, wait for my e-mail on how do I plan to play this.

India is one of the giant emerging market that is being watched very closely. Currently India is preparing for her annual budget and this is one of those uncertain times (you can check it via nervousness in currency market and stock market) when volatility goes higher and prices lower (for volatile markets).

I have been waiting for a good ETF to play India. There were IFN, FNI, INP and others but no clear cut play. INP was down as it will now no longer issue new shares. Wisdom tree just introduced a new ETF on Indian market named. The ticker is EPI and it is designed to track the performance of approximately 150 Indian companies included in the WisdomTree India Earnings Index on the annual index screening date. Each company has a minimum $200 million market cap, $5 million in earnings in the fiscal year before the screening date and a price-to-earnings ratio (P/E) of at least 2. Each September, the index is rebalanced. As the first ETF to offer pure exposure to local Indian securities, the WisdomTree India Earnings Fund grants investors access to a growing marketplace.

I am looking forward to an upside resumption of the market after the budget session (and assuming the US markets don’t crash). There are no options available on this so difficult to hedge on downside unless you look for equivalent underlying for India that has options and protect your investment.

Have fun trading with daily mood swings of Mr Market,

Profitable trading, OP



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4 responses to “Two Investment Ideas Worth Exploring”

  1. Avatar

    GLD is also a very good gold play if you like ETFs

  2. […] OptionPundit | Two Investment Ideas Worth Exploring Time to be sniffing out the gold miners? […]

  3. five whys Avatar

    One of the reasons why mining stocks (and therefore ETF of mining stocks) dont track gold prices closely is hedging by miners. Many miners sell portion of future production at a capped price and so rise in gold prices completely and immediately dont translate into revenue / profit upside.

    As a corrollary, it also means that the miners are currently selling future production at a higher prices.. and therefore, the profitability will increase say a quarter or two down the road! Will it translate into increased share price.. probably!

  4. […] reached record $1,007 an ounce and its close proxy, GDX is one of the few brighter spot. Read my earlier article about the […]

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