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Investing in Gold 2011

Written By Brian Hicks

Posted September 29, 2011

What do Victoria Secret model Gisele Bundchen and billionaire Warren Buffett have in common?

Besides fame, fortune, and investing smarts (yes, models have brains), they both hated the U.S. dollar… and may still to this day.

You see, back in 2007, the catwalk princess refused to be paid in U.S. dollars.gisele

Bundchen requested she be paid “only euros” because, as Bloomberg pointed out at the time, the dollar “can only depreciate because Americans led by President George W. Bush are living beyond their means.”

Even Buffett could be heard laughing when asked about the world’s best currency: “Not the U.S. dollar,” he’d often say.

Today Donald Trump is joining the anti-dollar ranks, having just accepted $200,000 in gold bullion for office space.

And it may be one of the smartest things Trump has ever done, knowing that as long as Bernanke is Fed chief, gold will be a great investment moving forward.

As do I… having held gold ever since $600.

Gold Headed Higher

And I know gold is going much higher — with a 10-year up-trending channel still in place. In fact, gold can fall as low as $1,500 and still be in that channel.

All gold did was overshoot the channel at $1,900, put in a double top, and refill a bullish gap around $1,670. 

I knew that a pullback was imminent.

The world wasn’t coming to an end; gold simply had to pull back. That’s it.

I am convinced that those buying gold under $1,600 are being handed a gift because the “flight to safety” to the crushed dollar and U.S. Treasuries can’t last long…

gold chart 092711

Buy All the Gold You Can

Let’s face it: Nothing has materially changed in the gold market. And the trend is still very much intact.

Also consider that a lot of the selling you saw in gold was mechanical: stop-losses, computer trading. The three margin calls and the U.S. dollar and Treasuries “flight to safety” trades didn’t help.

But remember, the dollar trade won’t last. These are the same Treasuries that were just downgraded by Standard & Poor’s.

Gold is still a strong insurance policy against market failure, financial meltdowns, inflation, currency devaluation, and fiscal uncertainties. And people are turning to the yellow metal in droves as inflation runs amok. (Inflation in America is realistically closer to 9% and rising, as compared to July’s 0.2% read.)

Gold could always pull back to the lower end of the channel ($1,500) on a global recession — or even the bursting of China’s bubble — but gold is going higher long term — especially if the Fed has to step in again.

How to Trade It…

My Pure Asset Trader readers cashed in on gold’s correction from its peak over $1,900, smartly jumping out before the fall. And they’re ready to do it again…

In fact, some of the very stocks we played last time I mentioned gold’s upside are likely to run back up with gold: Randgold Resources (NASDAQ: GOLD), New Gold Inc. (AMEX: NGD), Newmont Mining (NYSE: NEM) and Yamana Gold (NYSE: AUY).

I still prefer SPDR Gold Shares (GLD), which can be picked up at current market prices of $161, or hedged with a straddle (call and put have the same strike price in the same month).

We just picked up the GLD November 2011 173 calls (GLD111119C00173000) in our options program after locking in more than 103% gains on the GLD put option.

It’s up to you how you want to trade this.

Personally, I’d opt for options. Much more money is made there than with stocks.

And hey, you never know — you could end up with a supermodel on your arm on your way to the bank.

Stay Ahead of the Curve,

Ian Cooper Signature

Ian L. Cooper
Analyst, Wealth Daily