Letting my dog trade while I sleep....

Is gold going up? Is it going down? Is now a good time to buy? Nobody knows! Gold is a trade that is loved or hated by punters and the variation in its price shows that. If the US stock market heads south from its recent highs (is it doing that already?) will gold be a source of stability and be bought heavily, driving its price upwards? There are lots of opinions about this, of course, but all I can see, are the graphs!

2014 12 12 GLD


This is a graph of the Gold ETF GLD.  Given that it's hard to tell where the gold price is going from here, one might argue that it would make sense to make a regular monthly purchase in order to try and pick up gold at a reasonable price as a number of months progress. However, it isn't possible to buy a US ETF in an ISA (which is how I like to do some of my trading) nor is it possible to buy the UK ETF  Gold on a monthly basis. That may be a good thing, however, because gold miners share prices can be an exaggerated version of the price of the underlying metal. So, when the gold price is down, miners are even lower, and perhaps, when (if?) the gold price goes up, gold miners could go even higher. Some trading ISA providers will allow the trader to setup regular monthly investments in FTSE 350 companies that will bundle share purchases with other purchases, reducing the trade cost to as little as £1.50 per trade. Various possibilities might include Hochschild Mining,  or Centamin (a silver miner). Looking at their graphs, one can see that the share prices do appear to be currently quite low, and could possibly represent good value. Stockopedia rankings of both these companies are particularly low in the region of momentum, which, it might be argued, is a good thing for this type of speculative trade.

The recent fall in the price of oil might make one interested in a monthly investment in Vedanta Resources, a more general natural resources company, or an investment trust such as City Natural Resources High Yield Trust (CYN) whose assets are 36% oil and gas going alongside a variety of other mining interests.

My plan with my monthly purchases is to continue to buy while prices are depressed, with no stop-loss in place, then when prices start to rise, stop buying them and put a trailing stop in place, and start to buy something else (that's cheap). This approach is a bit like the well known 'Dogs of the Dow' approach: Buy the worst of the bunch, because they will probably go up the most in the future..... maybe...   Good dog, sit.... sit.... now jump....high!



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