gold commodities

While most experts agree the long-term outlook for gold prices is still bullish, the yellow metal's pattern this summer can only be described as one of fits and starts.

In all, gold has made 11 short-term bottoms since May 29, the lowest being a close at $1,552.40 an ounce on June 28. Meanwhile, subsequent rally attempts have all quickly run into resistance, stalling out at near $1,620.

This start-and-stop action makes it extremely difficult for investors to avoid being "whipsawed."

Fortunately, there's a way around this dilemma: Just use an options trading strategy that lets the market itself tell you exactly when to buy gold.

And, here's the best part: This clever options trading strategy will cost you only a few dollars.

It can be used on gold futures - e.g., the standard 100-ounce CME Group contract, on any of the gold mining stocks or on the much more affordable gold-backed exchange-traded funds (ETFs) on which options trade.

Taking the Guesswork Out of Gold Prices

For ease of explanation, I'll base our example on the most popular and actively traded of the gold ETFs - the SPDR Gold Trust (NYSEArca: GLD).

Recently quoted at $155.75, the price of a single GLD share usually tracks the price of one-tenth of an ounce of gold (discounted by 2.5%-3.0% for fund expenses and storage costs for the metal that backs the shares).

Here's how you would initiate the strategy, based on actual prices available last Friday: