Despite Recent Pullback, Gold Prices Are Headed Higher

December 10, 2009

By Karim Rahemtulla, Investment Director, Xcelerated Profits Report

The big news this week is the sudden pullback for gold prices and gold shares. But while the masses scratch their heads in bewilderment, smarter investors know that it had to happen at some point. Nothing goes up in a straight line without pulling back and this correction actually provides welcome respite.

As for us, we entered the gold market long ago and our positions remain solidly profitable. That's the benefit of using pro strategies to build wealth while mitigating risk and providing a valuable downside cushion.

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For example, our strangle trade on Yamana Gold Inc. (NYSE: AUY) finally has a chance of making us money on the short side, as Yamana's recent decline has led to a rise for our put options. This is good, as this is actually the more difficult side of the trade.

So what's my outlook for gold? In short, I think we're in a bull market and I wouldn't be surprised one bit to see prices shoot much higher at some point in 2010.

That said, if we get another pullback, that will probably mean we'll be sitting on a profit from our puts and will likely take those profits and go forward with a long position.

[ Editor's Note : Xcelerated Profits Report is published by Mt. Vernon Research, which also publishes the Investment U newsletter. For more information on Mt. Vernon and its publications, please click here.]

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