Commodity Investing

How to Prepare for a Gold Pullback

A gold pullback is what we’ve been talking about in The War Room for weeks.

After a massive run from the $1,300s to almost $1,550 over the summer, the recent pullback in gold prices is a welcome sight to those of us who know that runs don’t last forever.

In order to have a healthy rally in any asset, there must be a process of backing and filling. Much like building a strong foundation for a house, you must have a solid base.

Gold prices have a very solid base around the $1,400 level, but there is a gap in price between the low $1,400s and the mid $1,500s that needs to be filled.

The only way that can happen is for prices to have a pullback, which can last for days or weeks.

For gold stocks, that pullback is happening right now, and it’s sharp. Many companies in the sector have pulled back by more than 15% and some over 20%.

These are not just junior miners either. The pullback includes major companies like Barrick Gold.

In The War Room, we prepared for this pullback by following a junior mining stock called Americas Gold & Silver (NYSE: USAS).

Back when it was trading in the high $3 range, I wrote that we would put it on our screen to buy around the $3 level, a full 20% to 25% below the prices I had mentioned.

Our opportunity came last week when the shares dropped to the $3 range.

I sent a buy alert with specific instructions recommending how we should play the shares and what quantity to buy.

When you see a sharp pullback, you can’t deploy all your gunpowder in one shot…

You’ve got to spread that gunpowder and take multiple shots.

In The War Room, I’ve recommended that members slowly wade into the sector. There are several unique reasons why we chose Americas Gold & Silver, but I can’t get into that here.

It would be unfair to War Room members if I went into details, as it is a recent and ongoing play. But the strategy is compelling from an investor’s standpoint – so I encourage you to learn more by joining.

Action Plan: I think gold has a lot going for it right now with current global turmoil. The White House is bent on talking the U.S. dollar down (gold is priced in dollars, and a weaker dollar usually means stronger gold prices). Interest rates are lower globally, and there’s been a shift to less risky assets.

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With more than 20 years of experience, Karim has mastered the subtle art of options trading. What we admire about him is his ability to score huge gains while minimizing the massive amount of risk that often comes with options. Beyond his expertise in options trading, he is also the author of the best-selling book Where in the World Should I Invest? He publishes weekly about smart speculation in his latest free e-letter, Trade of the Day.

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