After a blistering rally in gold prices since mid-December, the precious metal is finally gearing up for a bull market run. And you can double your returns with my simple strategy.
That rally vaulted gold from $1,237 to almost $1,300 - a 5% gain in a month.
Over the past week, the price of gold has traded in a range between $1,280 and $1,297 as the metal consolidates, digesting its recent gains.
Recently released Fed FOMC December meeting minutes revealed that committee members have become increasingly uncertain about the timing of future rate hikes.
That caused further weakness in the dollar, helping oil regain $51 per barrel after hitting a Christmas Eve low of just under $44.
And speaking of the dollar, it's looking increasingly challenged as rate hikes are in doubt.
At the same time, other large central banks like the ECB are suggesting the possibility of initiating their own series of rate hikes later this year. That has the euro attracting capital and competing with the dollar.
Meanwhile, technical price action has helped confirm the start of a new gold bull market.
That's creating a rare new opportunity for gold traders, and I'll show you my simple recommendation on how you can "juice" your gold profits...
The price of gold has essentially gained no ground over the past week after moving within a $17 range.
Nonetheless, that's still impressive if you consider that the major U.S. stock indexes were up significantly over the last five trading days.
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And after the VIX volatility index peaked on Dec. 24 and then proceeded to get cut in half, gold continued to rise on the back of uncertainty.
Take a look at the VIX's rise and fall here...
While gold's been competing with rising stocks and oil prices over the last few weeks, it's still managed to rise and then hold those gains.
The U.S. Dollar Index (DXY) held steady from Monday until early Wednesday around 95.8, then slipped to test support at 95 late Wednesday (Jan. 9), before clawing its way back on Thursday (Jan. 10), then ending Friday (Jan. 11) near 95.7.
Here's how that ride looks in the DXY chart...
Despite this late-week bounce, the dollar's downward trend seems to be getting increasingly entrenched.
And that should be great for gold.
Now, here's how to ratchet up your returns with my simple play...
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Before we get into my play, let's revisit the U.S. dollar. Here's a look at the DXY price action.
There are several things to note. First, the DXY has failed at the 50-day moving average and then moved lower. It's now hitting support at 95, and it looks to be heading toward its 200-day moving average of 94.5.
You can see that here...
The 200-day moving average could well provide new temporary support, but given the ongoing negative momentum evidenced by the relative strength index (RSI) and moving average convergence divergence (MACD) indicators, I expect it's a matter of time before the DXY breaks through the 200-day level.
And that will help confirm a new bear market in the dollar.
As for gold, we've just seen both the RSI and MACD momentum indicators pull back.
Here's what I had to say in a recent update:
Any retreat from current levels is likely to be met with buying at the $1,260 level, helping to form a new floor at the 200-day moving average.I think with momentum indicators becoming a bit stretched, gold could need a little while to break through $1,300. I expect that level will bring with it some overhead resistance, and the gold price will need a few attempts to close above it.
But once that happens, I believe $1,300 will then become a new "floor" for the gold price, establishing a "launch pad" for gold to reach for its previous high last year of $1,360.
Last week's price action shows gold has indeed entered at least a near-term consolidation, which is clear from its recent sideways move.
But that's likely just a pause to build up energy for its next move higher.
With gold now distinctly above its 200-day moving average, a new bull market has begun.
For anyone who wants to get on board and "juice" their potential gold returns, here's my recommendation.
The DB Gold Double Long Exchange Traded Notes (NYSEArca: DGP) is a 2x leveraged gold ETF.
Shares have blasted higher, especially in the past week. But remember, the leverage works both ways, and if we get a pullback in gold, DGP will drop about twice the percentage gold does.
Take a look at how quickly it surged higher. That's just the beginning if this gold rally keeps going too.
You can buy now with the aim of holding as long as gold remains in an uptrend, above its 200-day moving average. Or you can wait for a retreat in the gold price before buying DGP. Just be aware that may not materialize.
Also, gold stocks are now in a bull market with junior and mid-tier miners outperforming the majors.
The VanEck Vectors Junior Gold Miners ETF (NYSEArca: GDXJ) is an easy one-click way to gain exposure. And with GDXJ now above its 200-day moving average, this is a great time to add exposure to the sector.
We'll check in on these trades regularly.
Meanwhile, just remember, with gold back above its 200-day moving average, the metal has now returned to quiet bull-market status.
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